Why Outside General Counsel? Part 2~Negotiation of Office Leases and Insurance Policies.

   In The Woodlands Texas, and especially in the Greater Houston, Texas area, one of the unfortunate consequences of the recent downturn of oil and gas prices, has been what is often phrased as a “buyer’s market” in the commercial real estate market. Many businesses have decided to take advantage of this by investigating new opportunities by which to relocate or establish its base of operations or a satellite office. Because of this soft market which inures to the benefit of the lessor, the ability to negotiate certain terms of the real estate lease increases. Lease clauses which were previously not capable of being negotiated are now subject to the addition of terms or modification which place the tenants on a more equal footing with the landlord.

While there are many clauses contained within a prospective lease which merit the attention of a company seeking new offices, there are several which have more potential to affect a company’s financial health and ability to deal with business interruption caused by such things as natural disasters, fires, equipment failure, and liability claims.  While many of these can be protected by the right type of insurance, it is very important for the business owner to provide the prospect of lease to the insurance broker and to make sure that the coverage provided is the best available to cover the obligations and contingencies which may arise under the lease.

For example, in many leases provide that a tenant must indemnify the landlord for the acts of the tenant’s “invitees” or “licensees”.  These legal terms of art would include the negligent acts of third parties such as a FedEx employee negligently running over another tenant or customer in the parking lot while delivering a package to the tenant.  The provision of contractual indemnity insurance may well afford the tenant/business owner coverage for this scenario. In addition, in a “soft market” it may be possible for the negotiation of these indemnity obligations in a more favorable or reasonable light  as regards the tenant/business owner.

Then to, are these circumstances which occur which may cause the building to lose power when the same approach can be utilized to obtain appropriate insurance, but also to firm up lease provisions which address whose responsibility is when these occasions arise. Appropriate insurance can protect against loss of income and added expenses.  There are available within the insurance industry endorsements which can be added to policies which provide coverage of damage outside of the building itself in the incidence of damage to telephones and date service lines as well as an extension of the indemnity period if more time is needed for actual restoration of business operations.  The right type of insurance can provide protection when the damage is so extensive that the landlord must cancel the lease and the tenant cannot lease elsewhere on comparable terms.

There are available solutions to those occasions when for example property damages caused to the leasehold by the tenant. For example, you may negotiate a landlord’s waiver of claims arising out of a tenant’s wrongful acts to the extent such damage is covered under the property insurance.  The lease may be written to include the landlord’s obligation to obtain its insurers waiver of the insurer’s right of subrogation, if available. Additionally one may make the effort to have the landlord agreed to restrict its recovery for any loss to the property insurance proceeds.

There are many such available solutions in the real estate market in which The Woodlands, Texas operates.  To be sure, these conditions will change significantly with the availability of lease space on the market coupled with the demand by the various business owners and operators located here.

The law firm of Thomas M Fountain & Associates, P. C. is an AV Preeminent rated law firm located in The Woodlands, Texas which is in the greater Houston metropolitan area.  Thomas M Fountain has 35 years of experience upon which the firm’s clients draw when necessary.   The firm prides itself on being proactive rather than reactive.  

For more information see our Website at www.HoustonTrialLaw.com or call (281) 296-6500.

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