Improvements and Betterments: What You Need To Know

Improvements and Betterments, H&K Insurance Agency, Watertown, MAThere’s a lot more to a place than just the furniture and posters. Sometimes you need to make changes—major changes—to your home or work. This might be repainting walls, re-carpeting floors, taking out walls, new bathrooms, upgraded electrical systems, and much, much more. While your landlord has given approval, they aren’t footing the bill. So who’s ultimately responsible for these improvements, and how do you safeguard them?

Defining Improvements and Betterments

From fixing up your rented home to be more livable, to making some major changes at your place of work, these improvements have a value. A value that could put you back if it was damaged or destroyed. Now, your property is insured by your landlord, but it’s insured for the base value of the property, and not your improvements. These improvements, known as “Improvements and Betterments” in the insurance and leasing circle, can be a thorny issues between landlords and tenants if not handled correctly.

From the Tenant’s Perspective

Let’s say you own a business, along with a brick and mortar store or office. You have a lease to the workspace, but you’ve decided you need to make some permanent additions to the place (as opposed to putting things into the place, such as computers or furniture). You spend about $50,000 making improvements to the place. Now you’ve talked to the landlord ahead of time about making the changes, but what else to you need to do?

Depending on your insurance and lease agreement, you may need to do one of the following:

  • Many leases require you to inform the landlord the cost of the Improvements and Betterments, along with the cost.
  • Check your lease to see who is responsible for repairs to Improvements and Betterments. If the lease is silent on the matter, talk to your landlord.
  • If you’ve insured the location yourself, make sure to add an Improvements and Betterments coverage.

From the Landlord’s Perspective

Covering Improvements and Betterments means a higher monthly premium on the property, and as such is unattractive to many leasers. However, a lack of coverage can cause issues with coinsurance penalties, or general relationships with your tenants.

It’s important to plan for Improvements and Betterments with the following steps:

  • When writing up a lease agreement, decide who will pay for fixing Improvements and Betterments.
  • Make sure to have tenants contact you when they are doing Improvements and Betterments, including the cost.
  • Add coverage on your property insurance, or an exclusion for Improvements and Betterments.

We hope this had provided a good overview of exactly Improvements and Betterments are, how they affect landlord/tenant relations, and why it’s important to add them to the value of the building (and therefore the property insurance). If you have any more questions, from the perspective of either a landlord or a renter, please contact H&K Insurance. We can help with providing coverage for your home, your business, or even your Condo Association.