In the Spotlight: Mutual Subrogation Waiver Benefits Landlord and Tenant

A very important lease provision, particularly from the tenant's perspective, is an effective subrogation waiver. The subrogation waiver essentially provides that in the event of a casualty that is caused by the negligence of one party to a lease, the negligent party is nonetheless not liable for the resulting damage to the extent that the damage is either covered by applicable insurance proceeds or to the extent it would have been covered by insurance proceeds had the other party to the lease maintained the insurance as required under the lease. Subrogation waivers provide, in effect, that both parties to the lease benefit from the casualty insurance maintained by either party. This concept is especially fair to the tenant in net lease situations where the tenant pays its pro rata share of the landlord's casualty insurance. Landlords also benefit from a mutual subrogation waiver to the extent that the tenant's leasehold improvements, fixtures, and personal property are damaged or destroyed due to the landlord's negligence.

2 minute read December 01, 2003 at 01:52 PM

By

William Crowe