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April 2017 — Property Management Quarterly — Page 27
Sessions
it. Most force majeure provisions
expressly exclude rental obligations
and instead apply only to perfor-
mance obligations. Assuming a ten-
ant has the right to invoke a force
majeure provision, it only will serve
to provide a tenant with relief if the
default is outside of the tenant’s con-
trol. Otherwise, it offers no protec-
tion.
• Sessions: Which default provi-
sions do the parties heavily negoti-
ate?
• Halstead: It is not uncommon for
tenants to request longer grace peri-
ods for the payment of rent or that
they be provided with written notice
and an opportunity to cure before a
failure to pay can ripen into a default.
Many tenants will request that vaca-
tion of the premises not be construed
as a default.
• Sessions: What is the main cause
for a landlord default?
• Halstead: Not surprisingly, the
most frequently asserted landlord
defaults relate to a landlord’s mainte-
nance and repair obligations.
• Sessions: Should there even be a
landlord default provision in a lease?
• Halstead: A well-drafted lease
will provide a landlord with the right
to written notice of a breach and
an opportunity to cure before such
breach can ripen into a default. This
can be critical particularly in an evic-
tion action where a tenant, who has
failed to pay rent, argues that the
tenant should be excused from per-
formance due to a landlord default.
It’s very easy to establish that the
tenant failed to provide the requisite
notice and therefore the landlord
cannot technically be in default.
• Sessions: Should lenders be given
an opportunity to cure?
• Halstead: Lenders usually have
the right to cure a landlord’s default
pursuant to the deed of trust, which
most leases are subordinate to. A
landlord should, however, be weary
of granting cure rights to the tenant’s
lenders. It’s not uncommon for a
lender providing a loan to a tenant to
request that a landlord waive its lien
rights and agree to provide the lender
with, among other things, cure rights,
access to the premises and the right
to remove collateral.
Counsel should review these types
of agreements, typically drafted by
the lenders, in advance. Such agree-
ments typically provide tenants’
lenders with rights that far exceed
those which would be afforded a ten-
ant and which can greatly lengthen
the period of time required for a
landlord to obtain legal possession of
its property following a default. s
market value of a property. Therefore,
we normally recommend hiring a
firm that specializes in valuing the
insurance replacement cost of your
property to help determine the proper
amount.
Although an insurance producer can
be helpful in determining what proper
insurance should be, there is no legal
duty for them to assess, advise or rec-
ommend the proper amount or type
of insurance coverage to purchase.
• The claim process and how it ties in
with everything above. The insurance
claim process can be quite challeng-
ing for a property manager. Not only
does the property manager have to
deal with tenant issues, but also may
have to mitigate further damage to
the property. You should notify your
insurer of your claim as soon as pos-
sible. Often the insurance producer
that you have chosen to work with
can assist with this process.
Remember it is the insured’s duty
to prove its claim. This means that
you will have to demonstrate to the
insurance company the extent of
your damages and the cost to make
it whole again. If you have never han-
dled a claim before, it may be in your
best interest to engage the services
of a public adjuster, who represents
your interests and not the insurance
company’s.
• How can you, as the property manag-
er, use this information to protect the cli-
ent and yourself? Engage the services
of an independent risk management
consultant to identify your exposures
to risk, assess the situation and assist
in the selection of coverage. You may
want to engage a public adjuster on a
standby contract in the event that you
have a property loss. Usually there
is no cost or obligation to engaging a
public adjuster prior to a loss. If your
insurance company allows it, you
also may want to preselect the inde-
pendent or company adjuster who
will handle your claim in the event
of a loss. Most of these items can be
assessed in an insurance or risk man-
agement audit.s
deLuise
A landlord should,
however, be
weary of granting
cure rights to the
tenant’s lenders.
Although an insurance producer can be helpful
in determining what proper insurance should be,
there is no legal duty for them to assess, advise
or recommend the proper amount or type of
insurance coverage to purchase.