When negotiating your commercial real estate leases in Arizona, you should include a damage provision. This is sometimes called a damage and destruction clause.
Most damage provisions state that the tenant is responsible for keeping the property in the same condition it was in when they took possession, minus any normal wear and tear.
When your commercial real estate is damaged, you should first address the type and cause of the damage.
Normal wear and tear
If the damage was caused by normal wear and tear, an accident or something out of the tenant’s control, such as a fire, the responsibility for repairing the damage is likely to fall on you.
However, the tenant should still be obligated to let you know of the damage within a reasonable time and give you an opportunity to make repairs. The tenant cannot simply abandon the lease unless the lease is terminated according to outlined procedures in the lease.
Your lease might provide both you and the tenant the right to terminate the lease by providing notice of the termination within a certain number of days after the event that caused the damage.
A typical example of this is when property is damaged from a storm or other natural disaster. The damage must usually be substantial or render the property unfit for habitation or conducting business.
Intentional conduct or gross negligence
You are usually not responsible for repairing the damage if it was caused by your tenant’s intentional conduct or gross negligence. If they do not already, your commercial leases should contain language that requires the tenant to promptly repair the damage while still being responsible for paying the rent required under the lease.
It is important not to overlook damage and destruction clauses in your commercial leases. A lease without this clause can cause major financial complications and confusion over responsibility when damage occurs.