CASUALTIES & CONDEMNATIONS - Understanding Commercial Leases - Part 13

This is part 13 of a multi-part series on Understanding Commercial Leases

CASUALTIES & CONDEMNATIONS

CASUALTY CLAUSES

• Provides mechanism wherein Landlord or Tenant can either rebuild / repair the premises depending on the amount of damage sustained or terminate the lease if there has been too much damage. 
• Governs how insurance proceeds are applied and payment (or reduction) of
  rent during repair / rebuilding period.

CONDEMNATION CLAUSES

• Provides mechanism for what happens if a governmental authority comes along and condemns the premises (usually for eminent domain for purposes such as roadways, etc.)
• Governs how any condemnation proceeds paid by the governmental authority are used.

LANDLORD'S INTEREST

• Casualty - Have as much flexibility as possible to either rebuild or terminate lease
• Condemnation - Keep all the condemnation proceeds for themselves and give Tenant the right to negotiate on their own behalf, thus avoiding the Tenant getting any of Landlord's proceeds

TENANT'S INTEREST

Casualty - Make sure Tenant has just as much right to cancel lease as Landlord and that
Tenant gets fair share of insurance proceeds to reimburse for any improvements previously made at Tenant’s expense that were damaged or destroyed

Condemnation - Make sure Tenant gets fair share of condemnation proceeds to reimburse for Tenant improvements and expenses, or has right to negotiate on their own behalf with condemning authority for payments.