Tenant's Improvements and Betterments Valuation

February 20, 2012

If a tenant makes improvements and betterments in a rental office unit, the tenant can insure those improvements as tenant's improvements and betterments under form CP 00 10, Building and Personal Property Coverage Form.

The tenant does not own the improvements but has use interest in the improvements. The improvements belong to the building owner. If the lease requires the tenant to insure the improvements, does the building owner increase the building value based on the cost of the improvements immediately or does the building owner increase the building value when the tenant's lease expires and the ownership of the improvements and betterments reverts to the landlord?

Hawaii Subscriber

It really depends on what the tenant is required to insure. If he is only to insure his use interest, the building owner should increase the building value on the cost of improvements immediately. If the tenant is required to insure the improvements and betterments themselves, either the building owner should increase the building limits and be reimbursed by the tenant, or the tenant should find a way to obtain building coverage, in which case the building owner would not need to increase the building value until the improvements and betterments revert to him.

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