Leasing 101: Indemnification & Releases
The indemnification, release, casualty, condemnation sections are highly technical and are somewhat dependent on the law of the state which contains the leased premises.
The exact language for the indemnification will depend on the individual state law.
The lease ideally should contain mutual indemnifications between landlord and tenant that exclude the negligence and willful misconduct of the other party.
The landlord may want tenant to indemnify the landlord even in cases in which the landlord is negligent. The basis for landlord’s position regarding this usually is that the tenant’s insurance should still apply even in cases of the landlord’s negligence.
However, in some states, any lease provision that relieves the landlord from liability arising from the landlord’s negligence is void.
Therefore, it is important to check the relevant state law on this topic to make sure there is a good understanding of both how the law governs this topic and what insurance needs to be obtained.
The release section also must be reviewed in light of applicable state law.
Often, the tenant is responsible for injuries that happen in the leased premises due to a defect, and landlord is not responsible.
As with an indemnification provision, lease provisions that exculpate the landlord from liability due to its own negligence are void under certain state laws.
The law of the applicable state also should be checked to see if landlord is liable for injuries or damage in the leased premises due to latent defects, concealed conditions, a nuisance or violation of law, and any failure to reasonably repair the leased premises.
The landlord already may attempt to address these items in the lease by pushing the burden onto the tenant, but an understanding of the applicable state law can help when reviewing this provision.
Waiver of Subrogation
Finally, the parties should agree to a mutual waiver of subrogation.
This is beneficial to the tenant as the landlord will waive its right against the tenant for property casualty. The tenant more likely will be the cause of the casualty than the landlord.
This is the case because the tenant is occupying the leased premises on a day-to-day basis and the landlord is not.
A mutual waiver of subrogation typically is not a problem to include in the lease as the insurance companies generally accept them in current leases.