Casualty and the Commercial Tenant: Follow the Terms of the Lease

A common mistake that many commercial tenants make is assuming that protections provided by courts for residential tenants are also available to commercial tenants. There are many statues and ordinances in existence designed to protect individual consumers and residential tenants. The reasoning behind these laws is the assumption there is unequal bargaining power between an individual and a larger, more well funded, commercial enterprise.

One of the protections that courts typically afford residential tenants is the warranty of habitability. This same protection does not necessarily apply to a commercial tenant unless it is expressly negotiated into the lease. When it comes to 'business to business' contracts of any kind, including commercial leases, with certain exceptions, a court will look no further than the terms of the contract.  Many tenants only look at the key business terms and pay scant attention to the remainder of the lease agreement.

One of the first Superstore Sandy-related cases to addressed by the New York courts brings this point home. In Maiden Lane Properties v. Just Salad Partners, 056312/13, N.Y.L.J. 1202598292879 (Civ., NY, Decided April 29, 2013), the building was without its power for 2 months. The landlord provided a generator to ensure residential tenants had access to electricity but the commercial tenants were on their own.  Just Salad obtained its own generator but experienced significant downtime and costs for obtaining and running its own generator. It decided to not pay its rent for those two months and the landlord sued.

The tenant claimed that it was entitled to a rent abatement under the casualty provisions of the lease. However, the tenant failed to follow the terms of the casualty provisions by providing the required notice of casualty to the landlord.  As a result, the court sided with the landlord .

While this case was decided in New York, the lessons we can learn from it still resonate in Ohio. When you are a commercial tenant you need to follow the terms you negotiated in the lease regardless of who unfair they seem when a crisis occurs. If a notice is required to obtain protections under the lease, then you must provide that notice. Also, it's important to consider what events qualify as a casualty under your lease. Under the New York case above, that landlord raised that issue as well. After a significant event has occurred is the wrong time to be reviewing your lease to determine if you are protected.

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