Who insures the buildout when a loss hits?

A medium-quality corporate office fit-out in the US and Canada ran $295 per square foot at Q1 2026 pricing, with a typical range of $230 to $375 and a full market range across building types of $170 to $425. Source: JLL US and Canada Office Fit-Out Costs Guide 2026, published May 2026. A 6,000 square foot suite at the midpoint is roughly $1.8 million of improvements that somebody has to be insuring.

Why improvements fall through the cracks

After a covered loss, the building structure is clearly the owner's and the tenant's contents are clearly the tenant's, but the improvements in between are ambiguous. Leases assign responsibility inconsistently, and the property policies may value the building without the buildout or may not clearly cover a tenant's installed improvements. The result is a real and often large category of value that neither policy was clearly written to rebuild.

What the lease should say, and the policy should match

The lease should state who owns the improvements, who must insure them, and to what value, and the insurance has to actually match that allocation. If the lease makes the tenant responsible, the tenant's policy needs TI&B coverage at the right limit; if the owner carries it, the building valuation must include the buildout. The failure mode is a lease that says one thing and policies that quietly do another.

The provision that decides who pays, and it is not the lease

The lease decides who owns the improvements. The policy decides who gets paid for them, and on an ISO form that comes down to one paragraph.

CP 00 10 10 12, E.7.e values a tenant's improvements and betterments three ways, and which one applies is decided by what happens after the loss.

Actual cash value, if you make repairs promptly. Actual cash value means replacement cost minus depreciation, so even the good outcome here is not a full rebuild of a ten-year-old build-out.

A proportion of your original cost, if you do not repair promptly. The form prints the arithmetic: multiply the original cost by the number of days from the loss to the expiration of the lease, then divide by the number of days from the installation of the improvements to that same expiration. A tenant eighteen months from the end of a ten-year lease recovers roughly fifteen percent of original cost. If the lease has a renewal option, the expiration of the renewal period replaces the lease expiration in that calculation, which usually helps the tenant and is worth confirming is in the lease.

Nothing, if others pay for the repairs. That is the third item, and it is the one that catches people. If the landlord's policy rebuilds the improvements, the tenant's coverage on the same improvements pays zero. Both parties can be paying premium on the same build-out and only one recovery exists.

That is the whole reason the tenant's endorsement set exists. CP 14 01 09 17, Scheduled Building Property, and CP 14 02 09 17, Unscheduled Building Property, put building fixtures and permanently installed machinery and equipment on the tenant's policy. CP 14 01 09 17 includes building glass in that definition; CP 14 02 09 17 requires a separate limit for it. CP 12 19 06 07, Additional Insured, Building Owner, runs the relationship the other way.

If the space would face code upgrades on a rebuild, a tenant buys that separately through CP 04 26 09 17. See ordinance and law coverage.

Getting the valuation right

Whoever insures the improvements, the value has to reflect what it would cost to rebuild them, which on a heavily built-out medical, restaurant, or retail space can be substantial. Underinsuring the improvements, or omitting them from the building valuation, is a common way a commercial property ends up materially short at a claim. We reconcile the lease, the valuation, and the policies so the buildout is actually covered and only once.