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Casualty: A Tenant's Perspective

By Glenn Browne
September 02, 2014

When a fire or other casualty damages a tenant's premises, especially when the premises is part of a larger retail facility like an enclosed regional mall, the rights outlined in the tenant's lease will dictate how the casualty is handled, including, without limitation, determining what obligations the landlord and the tenant have in the reconstruction of the premises, how long a landlord and a tenant will have to perform their work in order to rebuild the premises, any rent abatement that will occur and any termination rights that either the landlord or the tenant will have based upon the casualty. This article examines a tenant's perspective with regard to those topics, and offers certain insights into how a tenant should draft its lease in order to protect itself in the event of a casualty situation.

Landlord's and Tenant's Tasks Following a Casualty

Once a casualty occurs, and if neither the landlord nor the tenant terminate the lease (as discussed later in this article), both will typically each look toward their insurance company in order to reimburse them for the loss caused by the casualty. This concept is important because in a typical lease situation, where the lease form is most often drafted by the landlord, the landlord's obligation to commence its reconstruction efforts will be triggered by the landlord's receipt of insurance proceeds from its insurance company. However, the tenant's reconstruction obligation is most often triggered by the completion of the landlord's work and the landlord's delivery of the premises back to the tenant.

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