1C — November 23 - December 6, 2012 — The Road to Recovery — Mid Atlantic Real Estate Journal
www.marejournal.com
T he R oad To R ecoveRy
nfortunately, we have all seen the images of the unthinkable By Leo Leyva, Jordan Metzger and Tara Duggan Ryan, Esq. of Cole Schotz Does your lease cover the consequences of a natural disaster? U lease and the law.
cover those obligations? As for the landlord’s lender, theymay be forgiving of any late payment fees due to the storm, but they may not be willing to forego mortgage payments for any period of time. That leaves the landlord in a precarious situation when their tenants are displaced and not paying rent. How does the landlord cover their debt? If a landlord cannot meet their debt service without the rental payments, then the landlord may need to consider a workout and restruc- turing with their lender. If you are a tenant, you need to know if you are responsible to restore the leased property to its original condition and whether or not you are required to make your lease payments, even though you are unable to use all or a portion of the property. If the property was severely damaged and you want to relocate, you need to determine if you have the right to terminate your lease. If you do not want to terminate your lease, or cannot under its terms, but are forced to relocate your
business temporarily, there can be significant costs associated with that. Does your lease pro- vide for reimbursement for the costs related to such displace- ment, including but not limited to moving fees, brokerage fees, possible increase in rent in the temporary space or do you have sufficient insurance coverage to cover those costs? In order to protect your inter- ests it is recommended that you take some immediate steps: 1. Locate and conduct a thor- ough review of your lease, all available insurance policies, declaration pages and endorse- ments; 2. Be sure to comply with all notice provisions in your lease and insurance policies; 3. Begin the process of record- ing the physical damage to your business property, which includes both real and personal property, whether by photo- graph or video; 4. Secure all documentation to assist in quantifying any damage to your business property, equipment and inventory and maintain cop-
ies of all receipts or expen- ditures relating to repairs, replacements or ancillary expenses necessitated by the storm; Astorm of this magnitude has not hit the Mid-Atlantic area in our lifetimes, so it is likely that no leases in effect today cover all of the possible consequences for such a storm. It is recom- mended that you consult with an attorney to help determine your rights and responsibilities under your lease and the law of the state in which the property is located. Leo Leyva is a partner at Cole, Schotz, Meisel, For- man&Leonard, P.A., chair- ing the firm’s Litigation practice in its NY office and co-chairing the firm’s RE Special Opportunities Group. Jordan Metzger is a partner at Cole Schotz and a member of the firm’s real estate and corporate departments. Tara Duggan Ryan, Esq., is an associate at Cole Schotz, working in the firm’s real estate practice. n
Whether you are a landlord or a tenant, the damage caused by Hurricane Sandy could have significant financial ramifica- tions for you. As a landlord you need to know what your respon- sibilities are with respect to the property, your tenants and your lender. You need to know if you are obligated under the lease to make any necessary repairs to restore the property to its original condition or if your tenant is required to make those repairs. Even if your tenant is required to restore the property under the lease, is such provision enforce- able when the damage is caused by a natural disaster? If your commercial building is uninhab- itable or basic services cannot be provided to your building, such as gas, electric, water, you need to determine what your legal rights and responsibilities are to your tenants under the terms of the lease or under the laws of the State in which your property is located. Once you know your obligations, do you have suf- ficient insurance coverage to
destruction c a u s e d b y Hu r r i c a n e Sandy. Dam- ages to homes a n d b u s i - nesses from the storm are conservative- ly estimated
Leo Leyva
to exceed $50 billion. Busi- nesses up and down the Mid- Atlantic coast have suffered property damage, inventory losses and are likely to suffer significant revenue losses due to interruptions in their business while they try to dig out from the wreckage. There is no question that San- dy’s impact will be felt for many months, possibly years, as busi- nesses look to recover from this horrific event. Landlords and tenants affected by the storm should review their leases to determine their rights and re- sponsibilities and consider what steps should be taken now to protect their rights under that
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