Navigating Lease Agreements: A Guide for Bar Owners

The journey of owning a bar is often fraught with challenges, and in recent times, these challenges have been amplified due to escalating costs, particularly in the realm of liquor liability insurance. This has left many bar owners teetering on the brink of closure or being forced to sell their establishments.

One of the most complex aspects of this situation is adhering to landlords’ lease requirements concerning insurance limits. The bar insurance market is already a tough one to navigate, and the demands for high insurance limits in lease agreements, or excess limits over the underlying, are burdening bar owners with hefty premiums.

Understanding the Risks

Landlords who insist on stringent lease requirements often fail to comprehend the stark difference between insuring a bar and a retail coffee shop. The involvement of alcohol significantly elevates the risk factor. In states like South Carolina, Texas, and Kentucky, securing full liquor liability limits is challenging enough, let alone requesting excess, which comes with a hefty price tag.

Deciphering Umbrella and Excess Limits

It’s crucial for bar owners to understand what these umbrella and/or excess limits cover. If the lease requires excess only over the underlying general liability policy, the cost might be somewhat manageable. However, if it needs to extend over the liquor liability, the expense can skyrocket.

In the past year, we’ve observed that Excess policies over liquor liability can add an additional $25K - $75K in premium on top of the already costly underlying policy. We’ve advised our clients to present these figures to their landlords in an attempt to negotiate a lower rent rate or agree on lower insurance limits.

Negotiating with Landlords

Every landlord is different - some are reasonable, others are inflexible. It’s essential to understand your situation and make the decision that best suits your business. If you’re uncertain about your bar’s lease requirements, don’t hesitate to reach out to us for a review.

Navigating lease agreements and insurance requirements can be a daunting task for bar owners. However, with a clear understanding of the risks, the coverage, and the potential for negotiation, it’s possible to find a path that ensures the sustainability of your business.