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Sandwich Lease Option Insurance - San Diego Real
Estate
How to protect yourself with insurance against
lawsuits when doing a sandwich lease rent to own transaction.
Sandwich lease definition: A leasing arrangement
in which an entity leases property from one party and leases that
same property to another party. In this arrangement, the entity is
both a lessee and a lessor, so it both pays and collects rent on
the same property.
Lessee: Is a person or entity that leases a
property from its owner, also called tenant.
Lessor: Is the Landlord (who is either the owner
of property or in the case of a Sandwich lease situation is the
tenant lessor) who rents the property to another party called a
tenant or lessee.
Property Insurance:
As a holder of a sandwich lease you do not have
an insurable interest in the property and consequently you cannot get
insurance on the property, for that reason you need to make sure of the
following:
1- The property owner of the property you leased
optioned:
- Purchases a "Landlord Insurance
Policy" that covers:
- fire
- vandalism and
- loss of rents
- You need to be listed as an additional
insured
2- Your "Tenant Buyer" needs to
purchase a "Renters Insurance Policy"
- Policy should cover
- fire insurance to cover tenant buyers
personal effects and all the fixtures and personal
property inside the property such as wall to wall
carpets, appliances etc.
- You need to be listed as an additional
insured
If you can not have an insurable interest in the
property why do you need to be listed as additional insured?
When you are listed as an additional insured
you will be notified if there is a cancellation or change in the
insurance policies. If there is a cancellation or change in the
insurance policies you will have to contact the property owner
or your tenant buyer to make sure they have their insurance
re-instated to cover your non insurable interest.
If there is no insurance or the insurance is
not adequate and the property burns down or is vandalized it is
likely to take more money than your potential profit to repair
and if you do not or can not afford to make the repairs you more
than likely will be sued by either the property owner or your
tenant buyer.
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