Improvements and Betterments: Who is Responsible for Covering?

When leasing a property,  there’s a possibility it may need changes. Many office spaces, apartments, and condos may not fit your needs right off the bat, but with the necessary changes executed properly, it can make the space perfect for you. Now, the question becomes: who is responsible for covering these upgrades – tenant or landlord?

What are Improvements and Betterments?

Improvements and betterments are often enhancements that increase the value of the property and become a permanent part of the building. These include changes in the structure, flooring, ceilings, appliances, built-in shelves, bookcases, and more. Because these changes can increase the value of the property, they create a value that can and should be replaced if damage to the property occurs in the future.

What is Improvements and Betterments Insurance?

Improvements and betterments insurance refers to a policy that a tenant can obtain when renting property to cover any modifications to the property. This is a policy separate from the landlord’s property insurance. Improvements and Betterments typically increase the value of a property, meaning additional insurance should be added to cover the difference. To learn more about the difference between renter’s insurance, business insurance and improvements and betterments insurance, contact H&K Insurance with any questions.

Is the Tenant Responsible?

Prior to making any changes to the building, you should review your lease and discuss the topic with the landlord. By reviewing your lease, you may be able to find who is responsible for covering everyday repairs and new enhancements. The tenant can purchase additional insurance to protect any improvements they make to the property. If the tenant purchases insurance for the additions, it may assist if anything were to happen during the time of construction as well.

Is the Landlord Responsible?

Typically, the landlord will hold an insurance policy that covers the structure and property, but that does not always include changes that will be made in the future. Even though the tenant is the one making the changes, the landlord is the one who will gain ownership of these adjustments, as they own the property.

Landlord and Tenant Communication

The landlord should clearly state in the lease who is responsible for covering the improvements and betterments to avoid any confusion from the start. It is essential that the tenant and landlord communicate regularly regarding Improvements and Betterments being made on the property. If neither the landlord or tenant purchases additional coverage for the improvements, the incorrect value of the property will be covered if a disaster were to occur, and the insurance company may not provide enough funds to repair all the damages.

Landlord Perks of Accepting Responsibility

If the landlord chooses to take responsibility for the coverage of improvements and betterments, they may take that opportunity to adjust the rent for the tenants. This is because the building will have a higher monetary value following the remodel.

After learning more regarding improvements and betterments, we hope you have a better understanding what steps need to be taken to avoid any conflict between a tenant and landlord. If you have any questions or want to learn more about Improvements and Betterments or insurance for your owned or rented property, contact H&K Insurance. We’re always here to help with your insurance needs.