Leases provide protection for both landlords and tenants. In the event that a claim arises involving any or all of the parties to the lease, the lease provides clarity in determining who is the responsible party, and for what. If a lease is written clearly and in unequivocal terms, courts tend to strictly enforce them as commercial contracts.
Be sure to read your own commercial insurance policies carefully as your policies may have terms within that not only require a lease but also specific language in order for your commercial insurance policies to provide full coverage.
Standard Lease Components
Require Your Tenants maintain Commercial Insurance |
Make commercial insurance a requirement in your lease and provide the recommended limits a tenant should purchase. Your tenant(s) having general liability and property coverage means there is less of a chance your policy will need to respond to a loss and your personal assets will be put at risk. Also require that the tenant(s) include you (the landlord), as an “Additional Insured” on their general liability insurance policy(ies). Obtaining “additional insured” status on your tenants’ general liability policies is key to ensuring that you are maximizing all of your risk transfer opportunities. |
Detail Necessary Maintenance and Upkeep |
Ensure the lease includes detailed descriptions of how maintenance will be handled, such as who, specifically, is responsible for different types of maintenance tasks and repair costs of all exterior and interior areas of the leased space. Speak with legal counsel if you are not sure as to what maintenance responsibilities can or cannot be delegated to a tenant under your state’s law. |
Include Hold Harmless and Indemnification clauses |
“Hold harmless” and “indemnification” clauses in the lease ensure that the tenant “holds harmless” and “indemnifies” the landlord when there are allegations/claims made against the landlord that arise out of the tenant’s use/leasing of the property. The “hold harmless” and “indemnification” clauses therefore result in the tenants being required to pay for the landlord’s attorney’s fees, costs, expenses, etc. needed to defend a claim, as well as cover the landlord for any monetary amounts needed to satisfy a settlement or judgment. |
Additional Tips for Commercial Property Owners:
- Obtain proof of insurance from a potential tenant prior to them signing the lease. Obtain full copies of the insurance policies as proof, if possible.
- Provide a complaint or maintenance form to your tenants that allows them to notify you when maintenance is needed. If a dispute arises, being able to reference log maintenance requests – that include dates and details – can be very helpful.
- Have a legal professional review your lease to ensure proper language and enforceability
- Review and update leases at the end of each lease term
- Draft leases with separate sections and headers so they’re easy to navigate when reviewing specific terms and obligations
- For additional information, please contact your agent
