1. Is there a suspension of rent clause?
If there is scope to do so, tenants could argue that they should not be forced to pay rent if they are unable to use the property or its facilities, which can be problematic for landlords due to a loss in income. Suspension of rent clauses are common in commercial leases but should always be carefully thought through.
2. Who is responsible for what?
Both the landlord and tenant have responsibilities as part of a commercial lease, but disputes arise where there is ambiguity or gaps in who is liable for what. By clearly defining the parties’ respective repair and insuring provisions within the lease, disputes can be avoided.
3. Has the lease been frustrated?
In the event that the damage caused by the incident is so severe, an argument could arise that the obligations in the lease contract have been made impossible to fulfil and so the parties are discharged from those obligations. Lease frustration is however an incredibly difficult case to prove for any tenant so landlords should seek legal advice to challenge any claim.
4. Making sure insurance pays out
Having the right insurance is important for the financial security of any property owner, but there is always the risk that the incident might not be covered, or the provider might seek to void the policy if they feel there is in any way a breach. To avoid any risk of ambiguity, ensure the lease describes what happens in the event of a non-payout or if insurance was not available. Commercial leases should also deal separately with ‘Insured Risk’ and ‘Uninsured Risks’.
5. Take a team approach
Landlords and tenants having a shared understanding of the responsibilities to each other can help in taking a prepared approach to prevent not only the worst-case scenario but potentially helping to avoid the problem altogether. Have conversations at the start of the lease and keep communication open, especially if there is a known potential risk for the likes of flooding.
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