If you are a small business owner who is planning on leasing a space, you need to be certain that you review your potential lease very carefully. Often, commercial tenants are so focused on the terms related to the amount of rent that will be paid that they forget to focus on other important aspects of the lease. However, it is important to be aware of a number of factors, such as whether the landlord or the tenant will be responsible for maintaining common areas and landscaping or taking care of other work that needs to be performed.
Another critical issue that needs to be addressed is liability. Every commercial lease should contain an indemnity clause that outlines the landlord’s and tenant’s responsibilities for any third-party claims that occur. It should also address what types of coverage are required.
What Types of Insurance May Be Required?
The types of insurance that may be required in a commercial lease will likely vary depending on the nature of the business that will be renting the space. The greater the risk is for potential third-party claims or contamination or damage to the space, the higher the limits for the insurance coverage will likely be. The most common required forms of insurance in a commercial lease agreement include, but may not be limited to, the following:
- Property – This will provide coverage for any damage that is done to the property. In some cases, the landlord may cover this type of insurance, especially if the building is a multi-tenant property. It is important for the landlord and tenant to discuss who will have the responsibility to rebuild the property if it is ever destroyed. In most cases, the landlord will have at least some responsibility for the property, and the tenant will have responsibility for at least the damage that they caused to their space.
- Liability – This type of insurance will protect the parties from any claims made by a third party, such as a customer that is injured while on the leased premises.
- Business Interruption – Many business owners will choose to carry this type of insurance, because it will replace their income that is lost while the property was untenantable and when the business could not operate. Most commercial leases do not require this type of insurance, but many business owners will carry it for their own protection.
- Additional Insured – Most commercial leases will require the landlord to be listed as an additional insured on the liability and property insurance policies of the tenant. This means that any loss that the landlord sustains on the rented promises will be treated the same as a loss for the tenant. This type of provision is very important to ensure that the insurance company will pay claims quickly. Without this type of clause, valuable time could be lost while the insurance company attempts to sort out which party suffered the loss and which loss will be covered by the policy. This issue becomes even more of a problem if the landlord and tenant each have their own policy with their own insurance company.
Contact an Experienced Illinois Commercial Real Estate Attorney
The skilled DuPage County commercial real estate lawyers at Momkus LLC have years of experience helping business clients ensure that they are protected by the terms of their commercial lease. Before you sign on the dotted line, contact us today by calling 630-434-0400 to schedule a consultation.