Tenant liability and insurance provisions

Following a fire at a restaurant, a landlord could bring a claim against its tenant for loss and damage caused to the rest of the building in which the restaurant was situated.
  • Submitted 31 August 2018
  • Applicable Law UK (England & Wales)
  • Topic Real Estate


In this case, the High Court found that under the specific terms of a lease of part of a building, a landlord was only required to insure the premises comprised in the lease and not the rest of the building. Consequently, the landlord could recover against its tenant in relation to loss and damage caused to the remainder of the landlord’s building, following a fire which started in the tenant’s restaurant premises.

Background and issues

The Salisbury Buildings in Harrogate (the Building) were owned by High Point Estates Limited (HPE). It comprised a restaurant on the ground floor and basement levels (the Premises) which was let to Prezzo Limited (Prezzo), and flats above.

On the 18 March 2014 a fire started in the Premises, which caused significant damage to both the Premises and the Building.

Insurers indemnified HPE under the terms on the insurance policy for the losses suffered, but as the fire started in Prezzo’s Premises, the insurer, exercising its subrogation rights and stepping into the shoes of HPE, sought to recover from Prezzo in relation to the damage caused to the rest of the Building (not including the Premises).

Case law provides that no claim for damages in negligence can be made against the tenant where the landlord’s insurance was shown to be for the joint benefit of both the landlord and tenant. Unfortunately for Prezzo who were seeking to rely on this, it was argued that the insurance wording in their lease was narrowly worded, and only required HPE to insure the Premises and not the rest of the Building. Consequently, HPE’s position was that the insurance in relation the rest of the Building was not for Prezzo’s benefit and HPE should be able to bring a claim against Prezzo for the loss and damage caused to rest of the Building.

The law

In Mark Rowlands Ltd v Berni Inns Ltd [1986] Q.B. 211, which saw leased premises destroyed by fire as a result of the tenant’s negligence, the Court of Appeal held that:

  • the insurance which had been affected in that case enured for the benefit of both the landlord and the tenant; and
  • the intention of the parties sensibly construed must therefore have been that in the event of damage by fire whether due to accident or negligence, the landlord’s loss must be recouped from the insurance moneys and that, in that event, they were to have no further claim against the tenant for damages in negligence.

The present case then identified the following summary of the law in relation to this area, highlighting the following principles:

"(1) The court should construe the terms of the tenancy agreement in order to determine how the parties have agreed to allocate risk between themselves

(2) A covenant by a landlord with his tenant to insure the demised premises in return for mutual obligations by the tenant is an important indicator that the parties intended that the tenant

(a) need not take out insurance for the risk covered by the landlord, and
(b) would not be liable for any loss or damage suffered by the landlord falling within the scope of that which the landlord has agreed to cover

(3) The strength of that indicator will depend upon the other terms of the tenancy, including whether they provide some alternative explanation for the covenant to insure

(4) The strength of that indicator is greater where the tenant is contractually obliged to pay for, or to contribute towards, the cost incurred by the landlord of insuring the premises

(5) Other relevant indicators include terms of the tenancy which relieve the tenant from repairing or other contractual obligation in the event of damage by an insured risk, or which require the landlord to lay out insurance monies on remedying damage caused by an insured risk, or which suspend the obligation to pay rent whilst damage from an insured risk prevents use of the demised premises. But the application of the principle in Rowlands does not depend upon the inclusion of all or any of these terms in the tenancy agreement, and

(6) Where applicable the principle in Rowlands will defeat a claim brought against the tenant in negligence even in the absence of a clause expressly exonerating the tenant from liability for negligence."

The outcome

Based on a detailed analysis of the construction of the insurance clause, and other provisions in the lease, it was held that the obligation on HPE was only to insure the "Premises" and not the rest of the Building. This meant a subrogated claim could be brought against Prezzo for the loss and damage in relation to the rest of the Building.


The case is a useful reminder of the need to carefully consider insurance provisions in leases and the way in which risk will be allocated, particularly where the tenant only has a lease of part of the building.

Prezzo Limited v High Point Estates Limited [2018] EWHC 1851 (TCC)

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