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Landlords - Are you covered for damage caused by subtenants? |
Over the term of a lease, it is common for tenants to decide they no longer need part of their premises or that sharing part of the premises with another business will offset the financial burden of meeting monthly rental payments. But landlords who consent to such arrangements need to be careful that any sublease adequately protects their interests. |
In a recent case the court found that a tenant was not liable for damage to the leased premises caused by its subtenant. A clause in the head lease between the landlord and the tenant stated that the tenant would only be liable for structural repairs which were necessary by an act or omission or default on the part of the tenant or by the tenant's use or occupation of the premises. |
The bitumen areas of the premises in question were suitable only for light commercial vehicles and cars, but the subtenant had used fork-lifts, heavy machinery and equipment, and stored heavy goods such as loaded sea containers on the bitumen. As a consequence, the bitumen developed cracking and potholes, and by the end of the term of the sublease was in need of substantial repair. |
Unfortunately for the landlord, the tenant was not held to be liable for the cost of these repairs. |
The court held that while the tenant had 'used' the premises for the purposes of subleasing, this was not the 'use' which had caused the damage. Rather, the damage was caused by the 'use' of the premises by the subtenant. |
Landlords should make sure that all leases contain provisions which oblige tenants to accept liability for the actions of subtenants, and equally, that subtenants contract directly with the landlord to comply with the terms of the head lease, particularly with respect to repairs and maintenance. Similarly, tenants should ensure that indemnities are obtained from subtenants to guard against nasty surprises in the event a subtenant causes damage to the premises. |
