Commercial Lease Casualty Damage and Restoration Clause
(Redirected from Casualty-Related Clause)
Jump to navigation
Jump to search
A Commercial Lease Casualty Damage and Restoration Clause is a commercial lease clause (within a commercial lease) that addresses the rights, obligations, and procedures for both the landlord and tenant if the leased property suffers damage or destruction from casualty damage (unforeseen events such as fires, natural disasters, or other casualties).
- Context:
- It can (typically) include Commercial Lease Casualty Damage and Restoration-Related Sentences (with commercial lease casualty damage and restoration-related provision).
- It can (often) be in a Commercial Lease Casualty Damage Article.
- It can (oten) contain Commercial Lease Casualty Damage and Restoration-Related Provisions, such as:
- Damage Assessment and Repair Feasibility Provision, which establishes the process for assessing the extent of the damage and determining the feasibility and timeline for repairs.
- Definition of Significant Damage or Destruction (Casualty Event) Provision (with labels CASUALTY_EVENT_DEFINITION, DAMAGE_THRESHOLD), a definition provision which defines what constitutes a casualty event that would activate the clause, such as:
For the purposes of this agreement, 'significant damage or destruction' shall be defined as any casualty event resulting in damage exceeding 50% of the total value of the leased premises,
(CASUALTY_EVENT_DEFINITION, DAMAGE_THRESHOLD)1as determined by a licensed insurance adjuster or other qualified professional.
(DAMAGE_ASSESSMENT)2
- Tenant's Casualty Damage Notification Obligation Provision (with labels TENANT_OBLIGATION, NOTICE_REQUIREMENT, NOTICE_TIMELINE), a notification obligation provision which requires the tenant to notify the landlord of any casualty damage, such as:
The Tenant shall notify the Landlord in writing of any casualty damage to the leased premises
(TENANT_OBLIGATION, NOTICE_REQUIREMENT)1within 48 hours of discovering such damage,
(NOTICE_TIMELINE)2providing a detailed description of the extent and nature of the damage.
(NOTICE_CONTENT)3.
- Casualty-Related Right to Terminate Provision (with labels TERMINATION_RIGHT, TERMINATION_CONDITION, TERMINATION_NOTICE), a termination right provision which allows either party to terminate the lease under certain conditions, such as:
In the event that the leased premises are damaged or destroyed to such an extent that they cannot be repaired or restored within 120 days,
(TERMINATION_CONDITION, REPAIR_TIMELINE)1either party may elect to terminate this lease by providing written notice to the other party
(TERMINATION_RIGHT, TERMINATION_NOTICE)2within 30 days of the casualty event.
(NOTICE_TIMELINE)3.
- Casualty-Related Landlord's Obligation to Repair Provision (with labels LANDLORD_OBLIGATION, REPAIR_STANDARD, REPAIR_TIMELINE), an obligation to repair provision which delineates the landlord's responsibilities to repair or reconstruct the damaged premises, such as:
The Landlord shall be responsible for repairing or restoring the leased premises to their pre-casualty condition,
(LANDLORD_OBLIGATION, REPAIR_STANDARD)1commencing such repairs within 60 days of receiving notice of the casualty damage
(REPAIR_TIMELINE)2and diligently pursuing completion of the repairs in a commercially reasonable manner.
(REPAIR_DILIGENCE)3.
- Casualty-Related Rent Abatement Provision (with labels RENT_ABATEMENT, ABATEMENT_CALCULATION, ABATEMENT_DURATION), which provides for rent abatement or reduction during the period the premises are uninhabitable or being repaired, such as:
In the event of casualty damage rendering all or a portion of the leased premises unusable,
(CASUALTY_EVENT)1the Tenant's rent shall be abated in proportion to the square footage of the unusable space compared to the total leased premises,
(RENT_ABATEMENT, ABATEMENT_CALCULATION)2from the date of the casualty event until the repairs are completed and the premises are restored to a usable condition.
(ABATEMENT_DURATION, REPAIR_COMPLETION)3.
- Casualty-Related Force Majeure Provision (with labels FORCE_MAJEURE_EVENT, PERFORMANCE_EXCUSED, NOTICE_REQUIREMENT), which may relieve both parties from fulfilling their contractual obligations due to acts of God or other uncontrollable events, such as:
Neither party shall be deemed in default of this lease for failure to perform its obligations
(PERFORMANCE_EXCUSED)1if such failure is due to a casualty event, act of God, or other circumstances beyond the party's reasonable control,
(FORCE_MAJEURE_EVENT)2provided that the affected party gives prompt written notice to the other party of the force majeure event.
(NOTICE_REQUIREMENT)3.
- Casualty-Related Insurance Proceeds Allocation Provision (with labels INSURANCE_PROCEEDS, RESTORATION_OBLIGATION, EXCESS_PROCEEDS), a proceeds allocation provision which addresses the allocation and use of insurance proceeds related to the casualty damage, such as:
Any insurance proceeds received by the Landlord as a result of casualty damage to the leased premises shall be used first for the repair and restoration of the premises,
(INSURANCE_PROCEEDS, RESTORATION_OBLIGATION)1with any excess proceeds remaining after the completion of such repairs to be retained by the Landlord.
(EXCESS_PROCEEDS)2.
- ...
- Example(s):
- A Comprehensive Casualty Damage and Restoration Clause (with ___ provision, ___ provision), such as:
In the event of any casualty damage to the leased premises, the Tenant shall promptly notify the Landlord in writing, providing a detailed description of the nature and extent of the damage.
(TENANT_OBLIGATION, NOTICE_REQUIREMENT, NOTICE_CONTENT)1If the premises are damaged to such an extent that they cannot be repaired within 90 days, as determined by the Landlord's licensed contractor, either party may terminate this lease by providing written notice to the other within 30 days of the casualty event.
(REPAIR_TIMELINE, CONTRACTOR_ASSESSMENT, TERMINATION_RIGHT, TERMINATION_NOTICE, NOTICE_TIMELINE)2If the lease is not terminated, the Landlord shall commence repairs within 30 days of the casualty event and diligently pursue restoration of the premises to their pre-casualty condition, subject to delays due to force majeure events, insurance claim processing, or governmental approvals.
(LANDLORD_OBLIGATION, REPAIR_TIMELINE, RESTORATION_OBLIGATION, REPAIR_STANDARD, REPAIR_DILIGENCE, FORCE_MAJEURE, INSURANCE_PROCEEDS, GOVERNMENTAL_APPROVALS)3Rent shall be abated in proportion to the unusable square footage of the premises from the date of the casualty event until repairs are completed, unless the damage was caused by the negligence or willful misconduct of the Tenant or its agents, in which case no rent abatement shall apply.
(RENT_ABATEMENT, ABATEMENT_CALCULATION, ABATEMENT_DURATION, REPAIR_COMPLETION, TENANT_FAULT_EXCEPTION)4All insurance proceeds received by the Landlord for casualty damage shall be used for restoration of the premises, with any excess proceeds remaining the property of the Landlord.
(INSURANCE_PROCEEDS, RESTORATION_OBLIGATION, EXCESS_PROCEEDS)5
- An Office Lease Agreement (OLA) Casualty Damage Clause, such as:
If the leased office space is damaged by fire or other casualty, the Tenant shall immediately notify the Landlord, providing all relevant details of the event.
(CASUALTY_EVENT, TENANT_OBLIGATION, NOTICE_REQUIREMENT, NOTICE_CONTENT)1If the damage is such that it can be repaired within 90 days, as determined by a licensed contractor, the Landlord shall repair the damage at its own expense and the Tenant's rent shall be abated in proportion to the unusable area of the premises during the repair period.
(REPAIR_TIMELINE, CONTRACTOR_ASSESSMENT, LANDLORD_OBLIGATION, REPAIR_COST, RENT_ABATEMENT, ABATEMENT_CALCULATION, ABATEMENT_DURATION)2However, if the damage is so extensive that it cannot be repaired within 90 days, either party may terminate the lease by providing written notice to the other within 30 days of the casualty event, and the Tenant shall not be liable for any further rent payments.
(EXTENSIVE_DAMAGE, REPAIR_TIMELINE, TERMINATION_RIGHT, TERMINATION_NOTICE, NOTICE_TIMELINE, RENT_LIABILITY_TERMINATED)3
- A Retail Lease Casualty Clause allowing the tenant to terminate the lease if the premises are destroyed to an extent that makes the space unusable for more than a specified period, such as:
Notwithstanding any other provisions of this lease, if the leased retail space is damaged or destroyed by casualty to such an extent that it cannot be restored to a condition suitable for Tenant's use within 180 days, as reasonably determined by an independent architect or engineer, Tenant may elect to terminate this lease by providing written notice to Landlord within 30 days of the casualty event.
(REPAIR_TIMELINE, SUITABILITY_FOR_USE, INDEPENDENT_ASSESSMENT, TERMINATION_RIGHT, TERMINATION_NOTICE, NOTICE_TIMELINE)1If Tenant elects to terminate, Tenant shall have no further obligations under this lease, and any prepaid rent and security deposit shall be promptly refunded by Landlord.
(LEASE_OBLIGATIONS_TERMINATED, PREPAID_RENT_REFUND, SECURITY_DEPOSIT_REFUND)2If Tenant does not elect to terminate, Landlord shall proceed with due diligence to repair and restore the premises, and rent shall be abated in proportion to the unusable area of the premises until the restoration is complete.
(LANDLORD_OBLIGATION, REPAIR_DILIGENCE, RENT_ABATEMENT, ABATEMENT_CALCULATION, ABATEMENT_DURATION, RESTORATION_COMPLETION)3
- A Warehouse Lease Casualty Clause that addresses the unique aspects of warehouse properties, such as:
In the event of casualty damage to the leased warehouse, the Tenant shall promptly notify the Landlord in writing, and the Landlord shall have the premises inspected by a qualified professional to assess the extent of the damage and the necessary repairs.
(TENANT_OBLIGATION, NOTICE_REQUIREMENT, LANDLORD_OBLIGATION, DAMAGE_ASSESSMENT, REPAIR_ASSESSMENT)1If the damage is primarily cosmetic and does not materially impact the Tenant's use of the warehouse for its intended purpose, the Landlord shall proceed with repairs without any abatement of rent.
(COSMETIC_DAMAGE, SUITABILITY_FOR_USE, LANDLORD_OBLIGATION, NO_RENT_ABATEMENT)2However, if the damage materially impacts the Tenant's use of the warehouse, rent shall be abated in proportion to the unusable square footage until repairs are completed, and if the repairs cannot be completed within 120 days, either party may terminate the lease by providing written notice to the other within 30 days of the casualty event.
(MATERIAL_IMPACT, RENT_ABATEMENT, ABATEMENT_CALCULATION, ABATEMENT_DURATION, REPAIR_COMPLETION, REPAIR_TIMELINE, TERMINATION_RIGHT, TERMINATION_NOTICE, NOTICE_TIMELINE)3
- A Restaurant Lease Casualty Clause that considers the specific needs of restaurant tenants, such as:
If the leased restaurant space is damaged by casualty, the Tenant shall promptly notify the Landlord, and the Landlord shall have the damage inspected by a licensed contractor within 10 days to determine the extent of the damage and the estimated repair time.
(CASUALTY_EVENT, TENANT_OBLIGATION, NOTICE_REQUIREMENT, LANDLORD_OBLIGATION, DAMAGE_ASSESSMENT, REPAIR_ASSESSMENT, ASSESSMENT_TIMELINE)1If the damage is such that the restaurant cannot operate, rent shall be fully abated from the date of the casualty event until repairs are completed and the restaurant can resume operations.
(INOPERABILITY, RENT_ABATEMENT, ABATEMENT_DURATION, REPAIR_COMPLETION, OPERATIONS_RESUMPTION)2If the repairs cannot be completed within 60 days, the Tenant may elect to terminate the lease by providing written notice to the Landlord within 15 days of being informed of the estimated repair timeline, recognizing the shorter timeframe within which a restaurant needs to resume operations to maintain its business viability.
(REPAIR_TIMELINE, TENANT_TERMINATION_RIGHT, TERMINATION_NOTICE, NOTICE_TIMELINE, BUSINESS_VIABILITY)3If the Tenant elects to terminate, any prepaid rent and the security deposit shall be promptly refunded by the Landlord.
(LEASE_TERMINATION, PREPAID_RENT_REFUND, SECURITY_DEPOSIT_REFUND)4
- ...
- A Comprehensive Casualty Damage and Restoration Clause (with ___ provision, ___ provision), such as:
- Counter-Example(s):
- A Rent Escalation Clause, which outlines the conditions under which the rent will increase, unrelated to casualty or damage events.
- A Lease Renewal Clause, detailing the conditions under which the lease may be extended, not connected to damage or destruction of the property.
- See: OLA Casualty Damage Article.
References
2022
- https://www.whiteandbright.com/legal-consideration-commercial-lease-negotiation/
- QUOTE: Consider a Casualty Clause During Lease Negotiations
- The casualty provision in a commercial lease sets forth the circumstances under which a landlord or tenant would be obligated to restore the property following a fire, flood, or other natural disaster. It can also establish a party’s right to terminate the lease if a casualty event occurs. While these provisions can be complicated and do not always receive the same attention as other clauses in a commercial lease, it’s vital to ensure that they are not disregarded.
- Both parties to a commercial lease should have insurance that protects their legal and financial interests if the property is damaged in a disaster. A casualty event not only can cause a landlord to incur substantial repair costs — but it can render the property unusable for a tenant, causing business disruption. A casualty clause will typically state a tenant does not have to make rent payments while restoration is underway, but this can keep a tenant tied to the property for the duration of the lease.
- When engaging in a commercial lease negotiation, parties should think about how a casualty clause may impact their interests and negotiate accordingly. Although a casualty clause may limit a tenant’s right to terminate the lease if such an event takes place, the parties may consider negotiating a threshold restoration cost. A landlord and tenant might negotiate a specific cost threshold that the landlord would pay out-of-pocket before they could assert the right to terminate the commercial lease.
- QUOTE: Consider a Casualty Clause During Lease Negotiations