Water Pipe Leak in Commercial Property- Understanding Who is Liable

[Matt Lewis]

I'm purchased my first commercial property this year and just had a water leak from a pipe going into the water heater in one of my tenant's space. The water leaked through a shared wall into their neighbor's space and repairs are being made. Both tenants are on modified gross and believe that they are not financially responsible for the repairs needed in their space because it was not their fault. Based off our lease agreement, my lawyer says that it is the responsibility of each tenant to repair their own space. The way it was explained to me is that I am responsible for maintaining the roof, exterior walls, concrete floor, parking lot, landscaping, etc. The tenants are responsible for anything that happens within their leased space regardless of the cause. 

My questions are: 1) Is this a common concept in commercial properties that the tenant is responsible to repair, maintain, and replace anything in their leased space regardless of the cause? 2) If so, how do I best explain that to my tenants? I completely understand their thought process and would question it as well if I was in their shoes.

Thanks in advance for your thoughts.

[Evan Polaski]

@Matt Lewis, it has been a while since I was working in the commercial world, but from my recollection, your lawyer's interpretation is the most common.  Now, each lease will be unique, so you can't apply this across all commercial leases, but commonly, LL is responsible for exterior and structural components, while tenant is reponsible for any interior items.

How to best explain this: honestly, I would request the tenants have their own legal counsel review their respective leases.  I cannot think of a way that you (the LL who stands to "benefit" by them repairing their own space that they are paying you to use) will come across in a positive way.

Plus, the tenant who incurred damage due to the other tenant's leak, may have some legal rights to have the tenant with the leaking pipes pay for the repair in both spaces.

Now, beyond the legal side, you also need cognizant that most mom and pop tenants (which I assume these are) are not great with their money.  This could impact their ability to pay rent or want to renew.  So, how you want to handle that is sort of up to you.  

If this is the case, once their attorney reviews the lease and explains that they are indeed responsible for repairs, you could help out, if they don't have the money, and offer to pay for the repairs in exchange for a lease extension, or some type of repayment plan over time, etc.  If you do offer something like this, as you likely know, be sure to document it with a lease amendment signed by both parties.