Who’s liable for damages under a commercial lease?

There are many reasons why a commercial tenant needs to carefully review the provisions of their lease. One reason is captured in the following question: When significant costs arise from unanticipated events, who get stuck with the bill? Most leases contain insurance provisions, requiring either the landlord or the tenant (or both), to secure insurance coverage- often specifying both the type of insurance and the amount.  A recent case highlights the importance of the wording of the lease in determining responsibility for costs.

In Nantucket Business Centre v. AB Autorama Limited, a tenant operated an automobile repair shop and accidentally started a fire which damaged the premises. The court attributed liability for the damage to the tenant because there was no provision in the lease requiring the landlord to maintain fire insurance on the property. Also, the lease specifically provided that the tenant needed to operate its business in a safe manner (ie. not start fires). Take a look at the article which talks about the case written by Kingston lawyer William Poulos on the bar-ex website.

You can contrast this case with an earlier decision mentioned in February on the ’Law of the Land’ blog where a sprinkler malfunction damaged a tenant’s premises. The lease required the tenant to carry insurance which covered negligence on the part of the landlord, and required that the tenant’s insurer waive its right to pursue a claim against the landlord for any negligence. The court found on the tenant on the hook for the cost of repairs. This case doesn’t seem particularly fair considering that the damage was not the fault of the tenant.  But it’s not really about fairness exactly- it’s about what the lease says.