Below is an excerpt from a document received from a US Law firm with whom I sometimes deal.
I thought it could be of interest to any affected guys, out there.
"As recovery efforts continue in the New York Tri-State region following
Hurricane Sandy, commercial real property owners and tenants in affected
areas should be looking to their leases, mortgages and insurance policies
to understand their rights and claims. Here are a few things to consider.
Lease Provisions
Interruption of Utility Service. Most leases provide that the landlord is not responsible for
interruption of utility service to the leased premises. Accordingly, the tenant would not be entitled to
any abatement of rent even if the premises is not usable for a period of time. Landlords and tenants
should, however, review leases for negotiated provisions with respect to service interruptions, which
may include that rent will abate if such service interruption is caused by an act or omission of the
landlord or after an agreed upon number of days that service is unavailable. Under some leases, a tenant
may even have the right to terminate the lease if service has not been restored within an agreed upon
period of time.
Casualty. Leases normally differentiate between partial and total casualty. Casualty differs from service
interruption because casualty necessarily involves physical damage to the improvements on the
property.
In the event of a partial casualty, the question becomes whether or not the tenant is able to conduct
business in the space and, if so, to what degree. Rent may abate in proportion to the space which is
unavailable or entirely, depending on whether such an abatement was negotiated into the lease.
In the event of a total casualty, the landlord most often has an obligation or election to rebuild. If it
chooses not to, or fails to do so prior to an agreed upon deadline, then the tenant normally has the
right to terminate the lease. Some leases may include a provision that allows the tenant to terminate
the lease if the casualty occurs within the final months of the lease term, rather than being forced to
take possession of and fit out the space for a short period of time at the end of the lease term after the
landlord has completed repairs.
Mortgage Provisions
Mortgages include casualty provisions designed primarily to protect a lenders collateral. Depending on
the type of property or sophistication of the loan, or both, a mortgage may distinguish between partial
and total losses. Following any loss, possibly above a certain threshold, a borrower is required to provide
notice of loss to the lender.
In the event of a partial loss, a commercial mortgage holder is normally entitled to collect the
proceeds of insurance and either apply the proceeds to the mortgage balance or hold the proceeds in
escrow, pending repairs to be completed by the owner.
The requirements under mortgage casualty provisions vary greatly from lender to lender. Each lender
will have its own policies and procedures pertaining to the processing and application of insurance
proceeds. Negotiated provisions may include the right of the borrower to receive and use the
proceeds of insurance up to a certain limit, above which the lender is entitled to receive and hold the
proceeds.
Insurance Coverage
Policy holders should review their insurance coverage and contact their insurance carriers right away
with any questions pertaining to coverage, necessary notices and documentation required to preserve
rights and to proceed with claims. It is critical that claims be properly documented and submitted
timely under each policy.
Tenants are required to carry insurance coverage on their personal property and tenant improvements.
Landlords are responsible to insure the building structure, roof and common area of a property,
unless the tenant has expressly taken on that responsibility under the lease. Negotiated provisions
may include that a landlord have some responsibility with respect to repair or replacement of tenant
improvements and fixtures installed by or on behalf of a tenant.
Under most insurance policies, losses from fire, wind and other natural disasters are examples of what
is typically covered; however, standard property and casualty policies exclude flood as a covered cause
of loss. A separate flood insurance policy must have been purchased to have coverage for property,
real or personal, damaged in a flood.
Additional coverage is also carried by most landlords for rent interruption which, subject to a
deductible and exclusionary period, provides coverage for lost rent due to casualty. On the tenant
side, business income or business interruption coverage is typically part of a general business owner
policy package and it reimburses a business owner for lost profits and fixed expenses during the time
that a business is closed. It applies while the leased premises is being restored until the business is able
to open again. Business interruption coverage is normally subject to a deductible and exclusionary
period.
Contact your insurance broker or carrier with any questions pertaining to coverage and exclusions,
necessary notices and documentation required to preserve your rights and to proceed with claims"
For what its worth...
M
I thought it could be of interest to any affected guys, out there.
"As recovery efforts continue in the New York Tri-State region following
Hurricane Sandy, commercial real property owners and tenants in affected
areas should be looking to their leases, mortgages and insurance policies
to understand their rights and claims. Here are a few things to consider.
Lease Provisions
Interruption of Utility Service. Most leases provide that the landlord is not responsible for
interruption of utility service to the leased premises. Accordingly, the tenant would not be entitled to
any abatement of rent even if the premises is not usable for a period of time. Landlords and tenants
should, however, review leases for negotiated provisions with respect to service interruptions, which
may include that rent will abate if such service interruption is caused by an act or omission of the
landlord or after an agreed upon number of days that service is unavailable. Under some leases, a tenant
may even have the right to terminate the lease if service has not been restored within an agreed upon
period of time.
Casualty. Leases normally differentiate between partial and total casualty. Casualty differs from service
interruption because casualty necessarily involves physical damage to the improvements on the
property.
In the event of a partial casualty, the question becomes whether or not the tenant is able to conduct
business in the space and, if so, to what degree. Rent may abate in proportion to the space which is
unavailable or entirely, depending on whether such an abatement was negotiated into the lease.
In the event of a total casualty, the landlord most often has an obligation or election to rebuild. If it
chooses not to, or fails to do so prior to an agreed upon deadline, then the tenant normally has the
right to terminate the lease. Some leases may include a provision that allows the tenant to terminate
the lease if the casualty occurs within the final months of the lease term, rather than being forced to
take possession of and fit out the space for a short period of time at the end of the lease term after the
landlord has completed repairs.
Mortgage Provisions
Mortgages include casualty provisions designed primarily to protect a lenders collateral. Depending on
the type of property or sophistication of the loan, or both, a mortgage may distinguish between partial
and total losses. Following any loss, possibly above a certain threshold, a borrower is required to provide
notice of loss to the lender.
In the event of a partial loss, a commercial mortgage holder is normally entitled to collect the
proceeds of insurance and either apply the proceeds to the mortgage balance or hold the proceeds in
escrow, pending repairs to be completed by the owner.
The requirements under mortgage casualty provisions vary greatly from lender to lender. Each lender
will have its own policies and procedures pertaining to the processing and application of insurance
proceeds. Negotiated provisions may include the right of the borrower to receive and use the
proceeds of insurance up to a certain limit, above which the lender is entitled to receive and hold the
proceeds.
Insurance Coverage
Policy holders should review their insurance coverage and contact their insurance carriers right away
with any questions pertaining to coverage, necessary notices and documentation required to preserve
rights and to proceed with claims. It is critical that claims be properly documented and submitted
timely under each policy.
Tenants are required to carry insurance coverage on their personal property and tenant improvements.
Landlords are responsible to insure the building structure, roof and common area of a property,
unless the tenant has expressly taken on that responsibility under the lease. Negotiated provisions
may include that a landlord have some responsibility with respect to repair or replacement of tenant
improvements and fixtures installed by or on behalf of a tenant.
Under most insurance policies, losses from fire, wind and other natural disasters are examples of what
is typically covered; however, standard property and casualty policies exclude flood as a covered cause
of loss. A separate flood insurance policy must have been purchased to have coverage for property,
real or personal, damaged in a flood.
Additional coverage is also carried by most landlords for rent interruption which, subject to a
deductible and exclusionary period, provides coverage for lost rent due to casualty. On the tenant
side, business income or business interruption coverage is typically part of a general business owner
policy package and it reimburses a business owner for lost profits and fixed expenses during the time
that a business is closed. It applies while the leased premises is being restored until the business is able
to open again. Business interruption coverage is normally subject to a deductible and exclusionary
period.
Contact your insurance broker or carrier with any questions pertaining to coverage and exclusions,
necessary notices and documentation required to preserve your rights and to proceed with claims"
For what its worth...
M
