Understanding and Negotiating a Damage and Destruction Clause

Over the weekend a crane carrying a shipping container sized AC unit collapsed at 261 Madison Avenue subsequently damaging the building, many offices inside the building, and injuring pedestrians below. As accidents like this, along with natural disasters, are unfortunately a seemingly common occurrence across the country, we at Cresa feel that it is of paramount importance for you to understand your Damage and Destruction clause in your lease.

A damage or destruction clause in a landlord-tenant lease agreement defines the rights and obligations of the parties to the lease in the event that the leased premises are damaged or destroyed during the term of the lease. The damage or destruction clause serves the following purposes:

1. Notice and Repair Timeframes – A damage or destruction clause will state the tenant’s obligation to notify the landlord of a casualty, and the landlord’s timeframe for repairing the damaged premises;
2. When to Repair the Premises, When to Terminate the Lease – A damage or destruction clause will identify when a landlord is obligated to repair the premises, and when one (or both) parties may choose to terminate the lease;
3. Abatement of Rent During Repairs – A damage or destruction clause will also entitle the tenant to an abatement of rent for the period in which the landlord makes repairs to the premises;
4. Consequences of Tenant’s Casualty – A damage or destruction clause will also state the consequences of a casualty caused by a tenant or the tenant’s agents.

It is also important to recognize the most salient points to negotiate on when securing your lease:

1. How long does a landlord have to provide an estimate for the repairs on damaged space?
2. What is the time period a landlord has to complete repaired on a damaged space?
3. At what point is a tenant allowed to cancel their lease as the result of damages?

Please note that you should always have a lawyer and a real estate consultant review your Damage and Destruction clause. Thank you and please do not hesitate to reach out if you have any questions on this important issue.