Who Pays Commercial Building Insurance in New Zealand

If you’re signing (or renewing) a commercial lease, “insurance” can look like a small line item compared to rent, fit-out costs, and staffing.

But commercial building insurance can be one of the biggest ongoing costs in a tenancy - and if you misunderstand who pays for what, it can quickly turn into a nasty surprise.

That’s why the question of commercial building insurance: landlord vs tenant matters. In New Zealand, there isn’t a single rule that applies to every lease - the legal position is usually: it depends on what your lease says. In practice, many commercial leases allow the landlord to pass on some (and sometimes most) building insurance costs to the tenant as part of outgoings, but the details vary and are often negotiable.

Below, we’ll walk you through how building insurance is commonly handled in NZ commercial leases, what to look out for, and how to protect your business before you commit.

Why The “Commercial Building Insurance Landlord vs Tenant” Question Matters

When you’re running a small business, cost certainty matters. A tenancy can be profitable one month and tight the next - and insurance can be a moving target (especially after major weather events, changes in insurer appetite, and rising rebuild costs).

If you assume the landlord pays for building insurance, but your lease says you must reimburse it, you could be up for:

Annual insurance premiums (often charged as “outgoings”)
Broker fees and admin charges (depending on the wording)
Excess contributions when a claim is made
Cost increases mid-term if premiums jump and you can’t recover the cost through your own pricing quickly

On the flip side, if you’re clear on who pays what, you can:

Forecast your occupancy costs more accurately
Negotiate caps or limitations before signing
Avoid disputes when something goes wrong (like water damage, fire, storm, or burglary)
Make sure you have the right insurance cover for your own business risks

And importantly: building insurance is not the same as your business insurance. Many tenants only realise this after an incident.

What Is Commercial Building Insurance (And What Doesn’t It Cover)?

Commercial building insurance generally covers physical damage to the building structure and fixed elements of the property (depending on the policy). It’s usually arranged by the property owner because they own (and have an insurable interest in) the building.

Depending on the policy, “building” can include things like:

Walls, floors, roof, and foundations
Permanent fixtures and fittings
Landlord-owned services (for example, wiring, plumbing)
Common areas (for multi-tenant sites)

But building insurance usually does not automatically cover the things small businesses care about day-to-day, like:

Your stock
Your equipment and tools
Your portable items (like laptops or POS systems)
Your revenue loss while you’re shut (business interruption)
Your liability for injuries or property damage caused by your business activities

Those risks are typically handled through tenant-arranged policies, such as:

Contents insurance (stock, equipment, furniture)
Public liability
Business interruption
Glass (common for retail)
Statutory liability (depending on the business)

One more key point: even where the landlord arranges the building insurance, your lease may still make you financially responsible for some (or all) of the cost.

So Who Pays In Practice? Common NZ Lease Approaches

In many New Zealand commercial leases, the landlord arranges the building insurance, and the tenant contributes to the premium as part of outgoings. That said, there are a few common structures.

1) Landlord Arranges Insurance, Tenant Reimburses As An Outgoing

This is one of the most common “commercial building insurance landlord vs tenant” outcomes.

Practically, it often works like this:

The landlord takes out and maintains building insurance for the property.
The landlord invoices you for your share of the premium (sometimes monthly, sometimes annually), usually as part of “operating expenses” or “outgoings”.
If the building is part of a complex (like a retail strip or industrial park), you may pay a proportion based on floor area or another formula.

If you’re reviewing a Commercial Lease Agreement, you’ll usually see this described in the outgoings clause and the insurance clause.

What to watch for: some leases allow the landlord to recover not only the premium, but also administration fees, valuation costs, and broker charges. You’ll want to know exactly what can be passed on to you.

2) Gross Lease (Insurance “Included” In Rent)

Sometimes you’ll see a “gross rent” approach, where the rent is higher but certain outgoings (which may include building insurance) are included.

This can feel simpler, but you should still check:

Whether the rent can increase to reflect increased insurance costs
Whether there are any excluded outgoings you still pay
How disputes are handled if the landlord later changes the arrangement

This setup is less common in standard NZ commercial leasing, but it does come up - particularly in smaller, privately negotiated leases.

3) Tenant Arranges Building Insurance (Less Common, But Possible)

It’s less common, but some leases (or some special arrangements) require the tenant to arrange insurance for the building, or insure certain landlord-owned items.

This often happens where:

The tenant has very significant control of the premises (almost like ownership for the term)
The tenant has done major works and agreed to insure certain improvements
The parties have a bespoke arrangement

Important: if you’re being asked to arrange building insurance, you should get tailored advice before you sign. This can be high-risk if the policy doesn’t match the landlord’s finance requirements (for example, if there’s a mortgagee interest).

4) Mixed Responsibility (Landlord Insures Base Building, Tenant Insures Fit-Out)

A common “middle ground” is:

The landlord insures the “base building” and (if the lease permits) recovers the premium from tenants; and
The tenant insures their own fit-out, chattels, and business operations.

Where this can get tricky is defining what counts as “building” vs “tenant’s fixtures” vs “improvements”. If there’s a fire, you want to know which policy responds - and who pays the excess.

Key Lease Clauses That Decide Who Pays (And How Much)

If you want clarity on building insurance, you don’t just need a verbal assurance like “don’t worry, the landlord covers it”. You need the lease to spell it out.

Here are the clauses that usually decide the real-world outcome.

The Outgoings / Operating Expenses Clause

This clause typically lists which expenses the landlord can recover from the tenant. Building insurance premiums are often expressly included.

It may also cover:

Insurance valuation costs
Body corporate levies (if applicable)
Maintenance and repairs (sometimes excluding structural items, sometimes not)

If you’re unsure what you’ll actually be paying over the year, it’s worth getting a Commercial Lease Review before you commit - it’s often the fastest way to spot expensive “hidden” pass-through costs.

The Insurance Clause (Premiums, Excess, Evidence Of Cover)

Look for wording about:

Who must insure (landlord or tenant)
What must be insured (full replacement value, specific risks, glass, loss of rent, etc.)
Who pays the premium (landlord, tenant, or proportionate share)
Who pays the excess (especially if damage is caused by the tenant or their staff/customers)
Whether you can request proof of insurance and premium amounts

From a small business perspective, two big negotiation points are (1) excess and (2) uncapped premium increases.

Damage, Destruction, And Rent Abatement

If the premises are damaged and you can’t trade (or can only partly trade), your next question is: do you still have to pay rent?

This is where rent abatement clauses matter, and they often interact with insurance (for example, if the landlord claims under insurance for loss of rent).

You’ll often see this documented in a Rent Abatement Agreement or within the lease itself. It’s also worth understanding the concept of rent abatement before you sign, because it can be the difference between surviving an unexpected closure and paying rent on a space you can’t use.

Repair And Maintenance Obligations

Insurance doesn’t eliminate repair obligations - it just funds certain reinstatement works after insured events.

Your lease should clarify:

Who is responsible for day-to-day repairs
Who is responsible for structural repairs
What happens if damage is caused by the tenant’s actions (or negligence)

This matters because even if the landlord’s building insurance responds, the lease might still require you to pay the excess or compensate the landlord in certain circumstances.

Negotiation Tips For Tenants (What You Can Ask For)

Commercial leases are often presented as “standard”, but that doesn’t mean everything is non-negotiable. Even small tweaks can materially reduce your risk.

Here are practical points you can raise with a landlord or agent.

Ask For Transparency On Premiums And Allocation

If you’re paying building insurance as an outgoing, you can ask for:

A copy of the insurance certificate of currency (or relevant policy schedule)
Confirmation of the premium amount and what you’re being charged
The calculation method for your share (especially in multi-tenant sites)

You’re not trying to be difficult - you’re trying to budget properly and ensure you’re only paying what the lease actually requires.

Negotiate Who Pays The Excess (Or Cap Your Exposure)

Insurance excesses can be large. A common compromise is:

The landlord pays the excess unless the claim arises from the tenant’s act/omission; or
The tenant pays the excess, but only up to a capped amount; or
The tenant pays the excess only if they breached the lease.

What’s “fair” depends on the property and your business, but the key is not accepting unlimited exposure without understanding it.

Clarify Fit-Out And Improvements

If you’re investing heavily in a fit-out (say, a café kitchen or medical clinic rooms), clarify:

What the landlord’s building insurance covers vs what you must cover
Whether your fit-out becomes the landlord’s property at the end of the lease
Whether the lease requires you to reinstate the premises (and what that means)

If you ever need to exit or transfer the lease, these definitions matter a lot.

Plan For Assignment Or Exit

Many small businesses don’t intend to leave - but businesses evolve. If you sell, restructure, or move locations, you may need the landlord’s consent to transfer your lease.

Insurance obligations often carry through during an assignment process, and you’ll want the paperwork handled properly (including who is responsible for what between assignor/assignee).

This is where clauses and documents around Assigning A Lease can become very relevant, and in some cases you may also need a Deed Of Assignment Of Lease.

A Practical Checklist Before You Sign Your Lease

Before you lock yourself into a lease term, run through this checklist. It’s designed for small business tenants who want to be protected from day one (without getting bogged down in legal jargon).

1) Confirm What “Insurance” Means In Your Lease

Is “building insurance” specifically listed as an outgoing?
Are there additional insurance-related costs you must pay (valuation, broker, admin)?
Do you also have to hold public liability, contents, business interruption, or plate glass cover?

2) Understand The Numbers (Not Just The Words)

What was last year’s premium?
Has the premium increased recently (and by how much)?
Is your contribution calculated by floor area or another method?

3) Check The Excess Clauses Carefully

When do you pay the excess?
Is it limited to tenant-caused damage?
Is there a cap?

4) Review The Damage And Rent Relief Provisions

When does rent abate, and by how much?
Do you still have to pay outgoings if you can’t trade?
Can the landlord terminate after major damage (and what happens to your fit-out)?

5) Make Sure Your Own Insurance Matches Your Lease

Many leases require you to hold specific policies and list the landlord as an interested party. If you don’t comply, you could be in breach - even if nothing has gone wrong yet.

Also, if you have staff on-site or members of the public visiting your premises, you’ll want to stay on top of your health and safety obligations under the Health and Safety at Work Act 2015 (insurance doesn’t replace compliance, but the right cover can help manage financial risk when incidents happen).

6) Get Advice Before You Commit

Once you sign, you’re usually locked in for the term - and insurance costs are often ongoing and difficult to challenge later.

A quick legal check early can save you significant money and stress later, especially if the lease has unusual insurance wording or the outgoings are high.

Key Takeaways

In New Zealand, who pays for commercial building insurance is usually determined by the lease: the landlord often arranges the policy, but the tenant commonly pays all or part of the premium as an outgoing (depending on the wording).
Commercial building insurance is different from your business insurance - you’ll likely still need your own cover for contents, public liability, and business interruption.
The most important lease clauses to review are the outgoings clause, insurance clause, excess provisions, and damage/rent abatement provisions.
Premium transparency and excess liability are two areas where tenants can often negotiate better terms (or at least get clearer limits).
Rent abatement terms matter just as much as insurance terms - they affect whether you keep paying rent if the premises are unusable after an insured event.
If you may sell or transfer your business later, plan for assignment early so your insurance and lease obligations are clear throughout the process.

Note: This article is general information only and isn’t legal or insurance advice. Leases and insurance policies vary, so it’s worth getting advice on your specific situation before you sign.

If you’d like help reviewing a lease or negotiating insurance and outgoings terms so you’re protected from day one, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

Who Pays Commercial Building Insurance In New Zealand: Landlord Or Tenant?