Who Pays for Building Insurance on Commercial Property?

Understanding who pays for building insurance on commercial property is increasingly important as the UK sees a rise in flexible workspaces, hybrid working, and higher vacancy rates. Whether you’re a landlord managing a portfolio or a tenant taking on new premises, knowing how insurance responsibilities are shared can prevent confusion and avoid unexpected costs later on.

What Counts as Commercial Property?

Commercial property covers any building used for business purposes rather than residential living. This includes offices, shops, retail units, warehouses, cafés, industrial spaces and mixed-use buildings. Insurance requirements for these properties are often more complex than standard residential cover because commercial buildings tend to have higher footfall, more equipment and a broader range of risks.

Is the Landlord Responsible for Commercial Building Insurance?

In most situations, the landlord is the one who arranges the commercial building insurance, because they own the structure and are responsible for protecting the asset. The nuance lies in who pays for that policy.

Many commercial leases in the UK, particularly Full Repairing and Insuring (FRI) leases, allow the landlord to arrange the insurance while the tenant contributes to the cost through their service charge or an insurance rent. Under this setup, the landlord controls the insurance policy, but the tenant still funds some or all of the premium.

Other leases, such as Internal Repairing (IR) agreements, make the landlord responsible for both arranging and paying for the building insurance, while the tenant focuses only on internal upkeep. Multi-let buildings often sit somewhere in the middle, where the landlord insures the whole building and passes a proportion of the premium to each tenant. The principle remains consistent: the landlord controls the insurance policy, but payment varies depending on the lease terms.

What Does Commercial Property Insurance Cover?

Commercial building insurance protects the physical structure of the property. This includes the walls, roof, flooring, and permanent fixtures such as electrics, plumbing and heating systems. Cover normally extends to damage caused by fire, flood, storms, vandalism and accidental events.

Many policies also include property owners’ liability, which protects landlords if a visitor, contractor or passer-by is injured because of an issue with the building. Some policies include loss of rent if the property becomes uninhabitable after an insured event. Because commercial risks are more varied than domestic ones, it’s important for landlords to read the policy to understand exclusions, limits and any requirements placed on them.

You can learn more about this on our commercial property insurance page.

Do Tenants Still Need Insurance If the Landlord Has Building Cover?

Yes, tenants usually need their own insurance even when the landlord already holds a building policy. The landlord’s insurance protects the structure, but it does not cover the tenant’s business equipment, stock, furniture, or internal improvements. Tenants are also responsible for protecting themselves against claims from visitors or customers, which means public liability and employers’ liability (if they have staff) remain essential.

For example, a retailer storing valuable stock or an office housing specialist equipment will need contents and business interruption cover. If a tenant invests in refurbishing the interior, such as installing new lighting, counters or signage, they’ll typically need “tenant improvements” cover to protect that investment. In short, the landlord’s insurance covers the building; the tenant’s insurance protects the business inside it.

Landlord vs Tenant Responsibilities at a Glance

Real-Life Scenarios Explained

What happens if a tenant accidentally damages the building?

If a tenant causes accidental damage, for example breaking a window or drilling through a pipe, the landlord’s building insurance usually steps in, because it is designed to protect the fabric of the building. Once the claim is settled, the insurer may pursue costs depending on the circumstances and the lease agreement, but it is typically the landlord’s policy that responds first.

Can you insure a vacant commercial property?

Yes. However, an empty building requires specialist cover because insurers consider it higher risk. Most standard landlord policies reduce or limit cover once a property has been unoccupied for 30–60 days. A dedicated unoccupied commercial property policy can provide protection against fire, vandalism, water damage and liability risks, but you may need to comply with conditions such as regular inspections or draining water systems.

If you’re considering this type of policy, explore our empty commercial property insurance page for more information.

How to Insure an Empty Commercial Property

Unoccupied commercial buildings need tailored protection because they face more exposure to vandalism, break-ins and unnoticed maintenance issues. A specialist policy can offer varying levels of cover, from basic fire-only protection to full perils including theft and escape of water. Insurers often require additional security measures such as secure locks, boarded windows or regular visits. For landlords with several units, especially in areas with higher vacancy rates, this type of cover is increasingly important.

Next Steps

Responsibility for commercial building insurance is usually straightforward: landlords arrange the policy because they own the structure, while tenants handle insurance for their own business assets and activities. Payment for the building insurance depends on the lease, but the landlord controls the policy itself.

If you are looking to arrange a cover, QuoteSearcher will connect you with trusted UK insurance providers who specialise in commercial properties, helping you compare multiple quotes and find the right cover for your needs with quick, no-obligation options.