Dangers of Not Reading and Understanding Your Laundromat Lease
So now you’ve purchased your first operating Laundromat and you’re all excited about new paint, new floor and the improvements you’re going to make. You’ve selected hour insurance carrier based on the previous owner, recommendations of your salesman and just haven’t gotten around to reading your policy and your lease yet.
So what? You’re excited by brochures of potential new equipment you’re considering. How to fix some of those dryers that are making a funny noise and figuring out what do all these keys and what they open. You’re busy and excited. You've got coin to collect or computer generation income sheets to review. There are cleaning people and attendants to train and supervise, there just isn't time to read the paperwork. You just tossed it in a pile with the unread installation, operating and repair manuals. You can do it later.
However, one day you receive a mailed notice from the property manager about something missing from your insurance policy and the certificate of insurance you or your agent provided them. The notice might read something like this:
_“Re: Notice of Non-Compliance _Thank you for submitting the requested Certificate of Insurance. However, the certificate is not in compliance with requirements due to the following reason(s):
1. No Worker's Comp policy has been submitted.
2. Reason(s) for Non-Compliance: Cross Liability Clause has not been provided.
Must provide proof that cross liability is not excluded. Our records indicate that this matter has not yet been provided.”
What is a Cross Liability Clause? Didn't my agent or broker handle that? No. He merely followed your requests. He's not responsible for reading your lease provisions. If your requirements include a “Cross Liability” clause: “Cross Liability” means the policy allows one insured to bring a suit or file a claim against another insured. Most general liability policies provide cross liability coverage by NOT adding insured vs insured exclusion. One of the following conditions needs to be met in order to comply with the Cross Liability requirement.
Cross Liability is granted either via separate endorsement or via embedded policy provision to the Commercial General Liability, and it needs to be evidenced either by attaching a copy of the endorsement to the Certificate of Insurance or by specifically referencing it on the Certificate of Insurance – either case, insured vs insured exclusion must not be included in the policy.
If the policy is silent on cross liability and the policy does not include insured vs insured exclusion, Cross Liability must be evidenced on the Certificate of Insurance.
So, there you have it. The vast majority of new Laundromat owners never read and understand the requirements of their lease and depend on their insurance agents to magically guess which of the various provisions individual property owners require in their leases. Improper insurance coverage in often a basis for cancellation of your lease, and is often an incurable violation of the lease provisions at the option of the landlord.
If the landlord is trying to increase your rent, deny your option or turn over your profitable business to his niece, son or neighbor, this is a perfect way to cancel your lease. He can see you're making money if you tell him or he bothers to watch the customer traffic in your store. Greed can seize him to consider a way to take over your business.
After all, you are in his building and it is the great location he was smart enough to buy. He probably now thinks he rented the space for too little money. Now he just has to figure a way to take it away from you. It happens too frequently to be a legend. Be careful and comply with all your lease provisions.