When you are negotiating your commercial lease, you may be focused on things that feel the most immediate. Matters like the lease term, rental rate and CAM charges/fees all factor into your decision-making process. However, the spectrum of possible benefits or added responsibilities that your commercial lease can give you, or impose on you, can go much, much further. Even considerations like determining whether or not a tenant is liable to a landlord’s insurer for a fire in the tenant’s space may come down to exactly how the lease was written. In other words, every aspect and each detail potentially matters, so be sure your interests are protected by a knowledgeable South Florida commercial leasing attorney.
One recent example of this concept played out in state court in Miami. A restaurant chain signed a 190-month lease for a space in Miami Beach in 2010. Almost five years into the lease, a fire broke out in the restaurant’s kitchen. The insurance company that insured the property eventually paid the landlord more than $2.1 million. Subsequently, however, the insurance company took action against the tenant, filing a subrogation claim and seeking to recover damages from the tenant.
The tenant defended against the insurer’s subrogation action by asking the judge to dismiss the case. The tenant’s argument was that, based upon the language in the lease agreement it signed with the landlord, it was an implied co-insured with the landlord. (If the tenant was an implied co-insured, then the insurer couldn’t pursue subrogation; if it wasn’t, then the insurer could.)
In the end, as with many matters, the outcome came down to the language the landlord and the tenant used in their commercial lease agreement. The appeals court, in siding against the tenant, pointed to several paragraphs in the lease. Paragraph 41 said that the tenant was to be “fully responsible for all repairs and damages if Premises are partially or totally destroyed by fire or any other casualty caused by Tenant or its agents.” That language seemed to indicate that the tenant was expressly liable for fire damages it caused, which would work against its claim that could not possibly owe the insurer compensation.
Another paragraph also stated that the “Landlord shall not be liable for any loss or damage to any of Tenant’s personal property or Premises unless directly caused by the gross negligence or willful misconduct of Landlord . . . nor shall Landlord be liable for . . . damages incurred or suffered by the Tenant” as a result of fire. That paragraph, according to the court, shifted the risk of loss from the landlord to the tenant except in a narrow circumstance where the landlord was grossly negligent or engaged in willful misconduct, (which hadn’t happened in this incident).
The overall structure of rights and responsibilities laid out in the lease agreement did not support the tenant’s argument that could not legally be held liable to the insurer. For that reason, the insurer was entitled to continue pursuing its case.
What should you take away from that? Ultimately, there is much, more than what meets the eye when it comes to negotiating and drafting a commercial lease. To be sure you’re getting the best possible terms for your commercial lease, talk to the experienced South Florida commercial landlord-tenant attorneys at Stok Kon + Braverman, who have been providing beneficial representation to our commercial landlord and tenant clients for many years.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.
More blog posts:
How a Failure to Mitigate Damages Harmed One Commercial Landlord’s Breach of Lease Case in Florida, Florida Business Lawyers Blog, Feb. 8, 2019
What Happens When a Commercial Tenant Retains Possession of a Leased Space After the Lease Term Expired?, Florida Business Lawyers Blog, Oct. 15, 2018