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Lessor’s Risk Only · California

You own it. They run it.

Coverage for owners who lease a commercial building to tenants and don't operate a business there themselves: retail strips, offices, warehouses and single-tenant buildings.

Quick answer Lessor's risk only insurance is a policy for an owner who leases a commercial building to tenants and doesn't operate a business there, covering the building, the owner's liability and lost rents.

Lessor's risk only (LRO) insurance pays to repair or rebuild the building after fire, wind, theft and other covered causes.
A lessor's risk only policy covers the owner's liability for injuries in common areas, parking lots and sidewalks the owner controls.
Under lessor's risk only coverage, the tenants' businesses, equipment and their own liability stay on the tenants' own policies.
Lessor's risk only insurance is for commercial buildings leased to businesses, while landlord insurance usually means residential rentals.
When a building owner also runs a business in the building, the coverage becomes commercial property instead of lessor's risk only.

By Sam Alishahi · CA Insurance License #4348151 · Reviewed November 2026 · How this page is researched

Get a Quote Call (877) 711-4545

How it works

The landlord’s side of a commercial lease

A lessor's risk only policy insures the building, your liability as the owner, and the rent you lose if a covered loss forces tenants out. Your tenants' businesses, their equipment and their own liability stay on their policies.

Because the owner isn't running the operations, LRO is often written at a lower rate than a policy for an owner-occupied building. The tenant mix drives it: a restaurant, a gym or a cannabis tenant changes how carriers look at the whole building. I place it with admitted and specialty carriers based on the building, the leases and the tenants.

The buildingRepair or rebuild after fire, wind, theft and other covered causes.
Owner’s liabilityInjuries in common areas, parking lots and sidewalks you control.
Lost rentsRent you lose while a covered loss is repaired.
Tenant requirementsCertificates showing tenants insure their own operations.

Who I help

Owners that call me

Retail strip centers

Several tenants, shared parking and common areas.

Single-tenant buildings

One tenant on a net lease.

Office and medical buildings

Multi-tenant office space.

Warehouses and industrial

Buildings leased to distribution or light industrial users.

Retail below, apartments above

Buildings with both, written as one. See details

Owners who also occupy space

When you run a business there too, it becomes commercial property. See details

Before you call

What underwriters will ask

Having these ready means I can go to market on the first call. The quote form asks for the same things, and anything you don’t know yet can wait.

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Building: address, year built, square footage and construction.
Updates: roof, electrical, plumbing and HVAC years.
Tenants: each tenant's business and square footage.
Leases: who insures what, and required limits.
Rents: annual rental income.
History: current policy and claims.

Reading a tenant’s certificate before you file it

California Civil Code 1714 makes everyone responsible for an injury caused by a want of ordinary care or skill in the management of their property. Leases often ask the tenant to add the owner to the tenant's liability policy. IRMI defines a certificate of insurance as a document providing evidence that certain types of coverage and limits were purchased. It is evidence, not the policy.

The endorsement, not just the certificate: IRMI notes many insurers have used ISO's CG 20 11, Additional Insured, Managers or Lessors of Premises, to add landlords to a tenant's general liability policy. It is scheduled: the insurer lists the premises and the additional insured in the endorsement. I ask for a copy of the endorsement itself.
Leased, not licensed: CG 20 11 refers to premises leased to the tenant. Space used under a license rather than a lease, like the hotel gift shop in IRMI's example, may not fit; IRMI points to CG 20 26, Designated Person or Organization, for space that is rented but not leased.
After move-out: CG 20 11 excludes occurrences after the tenant ceases to be a tenant. IRMI's author reads that as the end of the tenancy, not the end of the lease period, and concludes a holdover tenant should not trigger the exclusion.
Hold harmless wording: indemnity clauses come in limited form (the tenant's sole negligence), intermediate form (the tenant's sole negligence or both parties' negligence) and broad form (even the owner's sole negligence). IRMI notes broad form is unenforceable in a number of states, so this varies by state.
Waiver of subrogation: an insurer's acknowledgment that it can't pursue a liable third party after paying a loss. IRMI says a waiver made before a loss generally doesn't bar coverage, while many policies exclude coverage if subrogation is waived after a loss.

None of this replaces the owner's own general liability policy.

When the tenant insures the building

Some leases, net leases among them, require the tenant to insure the building itself. IRMI's commentary on insurable interest (William Austin, December 2023) describes the setup: the lease requires the tenant to insure the building for each party's interest, and the lease creates the tenant's insurable interest in a building it doesn't own. The owner then seeks coverage under the tenant's property policy as an additional insured.

That leaves the owner relying on someone else's policy. Points worth building into the lease:

Loss payable wording: IRMI suggests documenting the owner's status with an endorsement such as ISO's Loss Payable Provisions, CP 12 18. It is designed to help the loss payee protect its rights if an act of the tenant, such as arson, voids the policy at the time of loss, and it gives rights such as advance written notice of the insurer's intent to cancel.
Notice of changes: even with that endorsement, the tenant can still cancel or change the policy, and the insurer isn't required to tell the loss payee in advance. The lease should require advance written notice of cancellation or coverage changes, and someone should follow up to confirm the insurer amended the policy.
A specific interest: name the owner's interest in the building specifically. IRMI warns that a loose "as their interests may appear" can bring a party into the settlement of any claim, even one unrelated to its interest.

Before an owner relies on a tenant's policy for the building, I ask to see the policy and endorsements, not a summary. If anything is missing, the owner's own commercial property quote is the comparison.

A tenant leaves: the vacancy clock

California's standard fire policy in Insurance Code 2071 says that, unless otherwise provided in writing added to the policy, the insurer isn't liable for loss occurring while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of 60 consecutive days.

ISO's Building and Personal Property Coverage Form, CP 00 10, has its own vacancy condition. On an owner's policy, IRMI explains (Catherine Trischan, January 2026), the building is vacant unless at least 31% of its total square footage is rented to a lessee and used for customary operations, used by the owner for customary operations, or both. Common areas count in the total, and a lease alone isn't enough.

If the building has been vacant for more than 60 consecutive days before a loss, that form excludes:

Vandalism
Sprinkler leakage, unless the system is protected against freezing
Building glass breakage and water damage
Theft and attempted theft

Payment for other covered losses is reduced by 15%. Buildings under construction or renovation aren't considered vacant, but the form doesn't define those words and courts have split (a major renovation may call for builders risk). ISO's Vacancy Permit (CP 04 50) suspends the vacancy condition for the permit period shown, though insurers may still exclude vandalism and sprinkler leakage, and Vacancy Changes (CP 04 60) can replace the 31% figure with a lower one. Some insurers use stricter wording than ISO, so tell me when a large tenant gives notice. When an endorsement won't do it, vacant building insurance is the next step.

California’s CASp line in every commercial lease

California Civil Code 1938 requires a commercial property owner or lessor to state on every lease form or rental agreement executed on or after January 1, 2017 whether the premises have undergone inspection by a Certified Access Specialist (CASp). Commercial property means premises offered for lease to operators of a public accommodation or a facility the public is invited to use.

Inspected, no changes since: if a CASp report exists and, to the owner's knowledge, no modifications or alterations affecting compliance have been made since, give the prospective tenant a copy before signing. The tenant keeps it confidential except as needed for repairs it agrees to make.
Repairs: correcting violations noted in a CASp report is presumed to be the owner's responsibility unless the parties agree otherwise. If the report isn't provided at least 48 hours before signing, the tenant may rescind within 72 hours after signing.
Certificate showing compliance: give the tenant the current disability access inspection certificate and report within seven days after signing, if not already provided.
No certificate: the lease must include the statute's prescribed statement: a CASp can inspect, state law doesn't require one, the owner may not prohibit an inspection the tenant requests, and the parties agree on timing, the inspection fee and the cost of repairs.

The Division of the State Architect notes that under the ADA either or both landlord and tenant can be sued; a lease can assign areas, but both remain legally responsible. DSA says qualified defendant status, which brings a 90-day stay and an early evaluation conference, requires a CASp inspection, report and compliance schedule in place before a claim is filed. Without a CASp inspection, statutory damages of $4,000 per occasion may be assessed under Civil Code 55.56.

Questions

Lessor’s risk only insurance, answered

What does lessor's risk only mean?

It's a policy for a building owner who leases the building to others and doesn't operate a business there. It covers the building, the owner's liability and lost rents, not the tenants' operations.

Do my tenants need their own insurance?

Yes. Leases usually require tenants to carry general liability naming you as additional insured, plus coverage for their own property. I can check the certificates you collect.

Is LRO the same as landlord insurance?

Landlord insurance usually means residential rentals. LRO is for commercial buildings leased to businesses.

What do underwriters rate on?

The building's age, construction and updates, its location, the tenants' businesses and the building's claims history.

Is a building vacant if a lease is signed but the tenant hasn’t moved in?

Under the ISO commercial property form IRMI describes, a lease alone isn't enough: on an owner's policy at least 31% of the building's total square footage must be rented and used for customary operations, or used by the owner. Some insurers use stricter wording, so check your policy's vacancy condition.

Do you offer lessor's risk only insurance outside California?

Yes. Clients across the country send the same quote form. Sam Alishahi is licensed in all 50 states and Washington, DC and places policies there directly. The shopping across carriers works the same way. Rules, minimums and markets differ by state — see insurance requirements by state.

Official sources

Often placed alongside this

Coverage

Commercial property insurance

Buildings, business property and income for commercial owners.

See coverage Coverage

Mixed-use building insurance

Retail below, apartments above, insured as one building.

See coverage Coverage

Shopping center insurance

Retail centers, strip malls and commercial condominiums.

See coverage

Also covered with this: Cannabis property insurance Office building insurance Parking lot and garage insurance Self storage insurance Vacant commercial building insurance

By state: Insurance requirements by state

Lessor’s risk only

Send the address and tenant list. I'll shop it.

The address, the tenants and your current policy are enough to start.

Get a Quote Call (877) 711-4545

Alishahi Insurance · Saman Alishahi, independent insurance broker, California License #4348151. General information, not a quote or a promise of coverage; coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued. Some policies may be placed with nonadmitted (surplus lines) insurers, which are not members of the California Insurance Guarantee Association (CIGA).

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