Landlords and building owners commonly require tenants to name them as additional insured. The additional insured endorsement, along with the lease indemnity agreement, are designed to protect the building owner from liability claims that result from the tenant’s activities. In recent years, the additional insured endorsement commonly issued to landlords (ISO CG2011) has undergone several revisions.  These revisions could limit the scope of coverage afforded to landlords and are important to understand.

The latest version of the ISO CG2011 was issued in 2013 and, as respects the landlord as an additional insured, reads as follows:

1. A.  Section II – Who is an Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [the named insured] and shown in the Schedule and subject to the following additional exclusions:

This insurance does not apply to:

1. Any "occurrence" which takes place after [the named insured] ceases to be a tenant in that premises.
2. Structural alterations, new construction or demolition operations performed by or on behalf of the [additional insured].

However:

1. The insurance afforded to such additional insured only applies to the extent permitted by law; and
2. If coverage provided to the additional insured is required by a contract or agreement, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured.

1. B. With respect to the insurance afforded to these additional insureds, the following is added to Section III – Limits of Insurance:

 
If coverage provided to the additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of insurance:

1. Required by the contract or agreement; or
2. Available under the applicable Limits of Insurance shown in the Declarations;

 
Whichever is less.
 
The verbiage added in 2013 is underlined. A careful reading of this revised wording will reveal a few potential issues for landlords and building owners. Under the 2013 form, the landlord is afforded coverage no broader that what is required by contract (the lease).  And, the limit of coverage available to the landlord is no more than what is required in the lease, even if the tenant carries higher limits.
 
We recommend several best practices to help building owners protect themselves from liability claims that occur on the property:

1. Tenants should provide a certificate of insurance and a copy of the actual additional insured endorsement to the landlord. A certificate of insurance alone is not adequate proof that the tenant’s policy has been properly endorsed to include coverage for the building owner.
2. An attorney should carefully review the lease agreement to ensure there is no limiting language that could restrict coverage under the 2013 edition of the CG2011.
3. Building owners and landlords should always purchase a general liability policy (or property and liability package) separate from any coverage provided by the tenant(s). 

 
The 2013 revisions to the landlord additional insured endorsement only underscore the importance of carefully drafting lease documents, especially the indemnity clause and insurance requirements.
Link to CG2011 04/13

​The initial excitement for the new tenant that has gone through all the processes of negotiating their lease, getting their dream design down on paper ready to be constructed, selected their contractor to complete the improvements, and purchased all their furnishings and equipment ready to open their doors; can be quickly put off when it comes to ensuring proper utility service is set up for their new facility.
 
It is often not thought of during the lease negotiation process; however a tenant improvement can present revisions needed to utility services such as power, gas and potentially water. Each of these utility companies in Las Vegas and the surrounding communities have very specific processes to establishing new and/or revised services to commercial facilities, and these requirements are rarely conveyed during lease negotiation processes, and subsequently new tenants are caught off guard with the cost and time it takes to establish new and/or revised service.
 
If there is one recommendation that could be provided to prospective owners, developers, etc. would be to engage all needed utility services, i.e. Nevada Energy, Southwest Gas, Las Vegas Valley Water District, Southern Nevada Waste Water District, Cox Cable, CenturyLink and, if applicable, Southern Nevada Health District.
 
There are specialty consulting firms within the surrounding Las Vegas area that can assist with inception of utility services needed for commercial projects, but barring the expense to utilize one of these firms, it is recommended to engage the needed utility service organizations as soon as possible once your final lease negotiations are completed, to avoid the more common than not pitfall of being ready to open your newest dream facility, but be held back because you do not have proper utility service established.

By: Guy Gugino, Vice President / Business Development Officer.
Wells Fargo

When making the decision to get out of the rent-paying game and become a building owner, the first step is to decide if you wish to purchase an existing building or start from scratch and build your own. It’s not an easy decision. However, if you can't find an existing facility that meets your needs in the location you desire, the alternative is to build.

The first step you should take is to enlist the help and advice of experts in the construction and finance field. There is a definite timeline to follow and a few precautions you should take to protect yourself and make the entire process go as smoothly as possible. Consider these helpful hints:

Financing: Before you start scouting for a piece of property or an available lot for your business, find out what size construction loan you can qualify for and any restrictions or limitations you may have to abide by. With that information in hand, it's easier to find the land you need before making an offer. Never make any commitments to purchase and build or close escrow before you have solidified your business financing needs.
 
A common reason that small business owners cite for not building or owning their property is a lack of funds. In addition to conventional loan programs, U.S. Small Business Administration (SBA) Guaranteed Loans can help address that issue.  SBA loans can provide high-leverage financing with low down payments for qualified borrowers. These loans can be used for a variety of purposes, including real estate purchases and new construction.

An additional benefit of SBA loan products is that a small business owner can get one loan to cover the costs of building, equipment purchases and working capital, with all the fees and costs determined and disclosed prior to closing. This means you'll only have to sign one set of documents and attend one closing.

Permits and Zoning Requirements: Once you find a spot to build, check the zoning restrictions and the permitting process. If it is properly zoned for your needs and building permits are attainable, it's now safe to make an offer. Remember, it can take up to three months to secure the necessary building permits. Make sure the closing is contingent on proper zoning and that any rezoning or remapping is complete before you sign on the dotted line. Your broker should write this into the deal, and if they don't or refuse to, look for a new broker. It's that important.

Architects: With financing information in hand, working with an architect becomes much easier. You'll know exactly how much money that’s available for your business to spend, and the architect will have guidelines and be able to stay on budget. It’s important to note that an architect may need four to eight weeks to complete the plans, so budget your time accordingly.

Contractors: Be sure to take time to identify and hire the best contractor you can afford and get several bids on the project before making a decision. Don’t make your decision based solely on the lowest bid. As part of your review process, check references, financial statements, proof of liability and worker's compensation insurance. In addition, contact the state contractor's licensing board to see if any complaints have been filed or actions taken against the contractors you’re considering. Finally, make sure your contractor and architect meet each other early on so they’re in agreement on the timeline, budget and any other special needs or circumstances.

Construction projects can be stressful and time consuming, yet with a little patience and prudence, building your own facility can be one of the wisest decisions you can make. Working with competent professionals will go a long way toward making your project a rewarding and profitable experience.