While there are a lot of issues that are very unlikely to happen during the course of your tenancy in an office rental space, such as natural disasters, accidents, or other sources of major damage to the property, it is best to consider those possibilities and their consequences when first drafting your lease. Here are a potential remedies to unexpected casualties to consider as you negotiate, as suggested in the articled “Planning for the Unexpected: Casualty issues in Commercial Properties”:
Even if it is unlikely that your office space suffers any severe damages throughout the course of your tenancy, there is a good chance minor issues will crop up occasionally, caused by weather or the natural wear and tear of a building. In order to prepare for minor and major damages, make sure your lease makes it very clear who is responsible for repairs, insurance, or replacing or improving any parts of the space. Don’t forget to factor in build-outs that might not be added until later in your tenancy.
#2 Lease Termination: Tenant and Landlord Rights
It is important to make sure that you will not be stuck in the lease in the event of major or partial property damage requiring repairs that will take a long time. Try to negotiate for permission to be released from the lease in the event that the timeline for repairs exceeds a reasonable amount of time, for example if it is going to take more than six months or a year, depending on the size of the space. Consider also what will happen if your landlord sets a reasonable original timeline, but unexpected delays occur and push back that timeline. Be clear about what the parameters are and if and when you can terminate the lease.
On the other hand, a landlord might to provide for their own right to terminate the lease if the damage to the space means that you as the tenant can pay a rental rate far below market value. You as a tenant want to avoid a situation in which the termination of your lease by the landlord is permitted if tenants in similar situations also have their leases terminated.
#3 Rent Abatement
It is common to include in a lease a clause allowing a tenant’s rent, CAM expenses, and tax payments to be reduced in the event of a casualty while a landlord performs the obligatory repairs.
#4 Damage to Important Parts of the Property
Even if your specific office space is not damaged, it is important to talk about what will happen in the event that other key areas of the property are damaged—for instance, the parking lot, or the space of an anchor tenant who might leave and decrease the value of the location.
#5 Waiving of Tenant Fault
Make sure that in your lease you negotiate for a mutual release from responsibility for property damages for both parties so you are not in danger of being pursued over subrogation costs. Even if the landlord tries to claim that the damage was partially because of tenant negligence, you should protect yourself from this possibility in all aspects of the lease since you already help pay for the landlord’s property insurance through CAM costs.
While you might never have to use any of these clauses in your lease, it is important to make sure your business’s rights and interests are protected in the event of a casualty to the property.