One of the most difficult and often neglected areas of leasing comes after the destruction of property, when a homeowner or commercial tenant is forced into
temporary space while the destroyed property is being rebuilt.
Imagine the scenario: Due to a flood, a
re or other casualty, a homeowner sud-enly needs to find temporary shelter.
r, a retail shop owner or office tenant,
gainst incredible odds, finds his or her
usiness decimated and has to relocate
o a temporary location without losing
beat. These are not easy prospects, but
hey are ones in which risks and inconve-iences can be lessened, and the savvy in-urance adjuster/agent can turn adversity
nto an advantage by working closely with
team of professionals to make sure that
he damaged party gets back on his or her
et as quickly as possible.
When disaster strikes, some of the is-ues faced by residential homeowners are
milar to those of commercial tenants,
ut each must address a unique set of
hallenges. Here is a summary of some of
he general pitfalls and challenges.
There is an essential difference between
he commercial and residential occu-ant. For the most part, the office ten-nt or retail shop owner is leasing space,
hile the homeowner owns his property.
While these distinctions are not always
alid (a residential tenant may be subject
o a long-term lease and an office occu-ant might own an office condominium
r even the entire building), most of the
me they apply. The key for the damaged
arty is to identify key issues, act quickly
nd maintain flexibility while the original
amaged structure is being repaired.
The commercial lease
When the commercial tenant is forced
o leave for temporary space, unless the
uilding owner is providing space else-
here in the building or shopping center,
he tenant will look for another place and
must quickly obtain space in order to op-
rate the business. In either instance, the
nant must make sure that it is duly pro-
cted. If it is signing a temporary lease at
he same structure (for example, an office
building moves the tenant to transient
quarters in the building), then the parties
may subject the new temporary lease to
the same terms as the existing lease with
For example, the size of the space, the
rental due, the termination rights of the
parties and contingencies for delays are
all areas to be negotiated. In many ways
a new temporary lease is a more difficult
animal when the tenant temporarily relocates to a location off-site. In this case, an
entirely new lease needs to be dealt with
and the tenant will need to shorten the negotiating time without compromising too
much. Usually the landlord will require its
form of temporary lease to be used, which
may not be very different from its usual
form. Generally, the tenant will want its
attorney to review the proposed lease
quickly but thoroughly, to avoid problems
later. Here are some of the issues that the
tenant should address:
• Size of temporary space. The size needs
to be adequate and the square footage
accurate. The tenant may wish to independently measure the space.
• Flexibility to terminate or stay longer.
The tenant cannot know for certain
when the damaged space will be repaired, so the length of the temporary
lease may be difficult to determine. It is
important to try to negotiate termination extension rights, even if they cost
a bit more. The tenant may also wish to
explore month-to-month options. Another possibility is to enter into a year
term, with an option to terminate on 30
days’ notice, perhaps for a fee.
• Look closely at operating costs. Since
the lease is only temporary, the best
way to address operating costs is to
include them in the rent without any
adjustment for increases. The lease
should ideally be full-service so that
the tenant knows what its total costs
are each month.