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Commercial Landlord Protected by Indemnification and Risk Transfer Clause in Lease (NY)

March 25, 2022

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<p style="text-align: justify;">New York General Obligations Law Section 5-321 provides that every agreement in connection with the lease of real property exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor in the operation or maintenance of the real property shall be deemed void as against public policy. In other words, a tenant cannot agree to indemnify his or her landlord for the landlord’s own negligence in a lease in New York.</p>
<p style="text-align: justify;">There is an exception, however, allowing for the indemnification of a lessor’s negligence where the lease involves sophisticated commercial parties, negotiating at arm’s length, who agree to allocate the risk of liability between themselves, typically through insurance.</p>
<p style="text-align: justify;">The Supreme Court of New York, Bronx County, recently addressed these issues in a case involving a commercial tenant. In <em><a href="">Titumir v. Barker Ave Estates LLC</a>,</em> plaintiff leased the first floor of the subject premises and sold discount hardware supplies. The lease agreement provided that plaintiff was responsible to maintain and repair the premises, fixtures, and appurtenances. In July 2017, water began to leak from the apartments above the store and the ceiling eventually collapsed, causing damage to the store, plaintiff’s goods, and an alleged loss of business. Plaintiff sued the landlord, claiming that it failed to comply with its nondelegable duty to maintain the premises and make repairs.</p>
<p style="text-align: justify;">The court disagreed and granted defendant’s motion for summary judgment based on the lease provision requiring plaintiff to maintain and repair the premises. The court held that this provision exempts defendants from any liability arising from the water leak and that since this claim involved a commercial tenancy, the lease falls within the exception to General Obligations Law Section 5-321. The court also noted that a rider to the lease required plaintiff to purchase insurance for property damage, making it clear that the parties intended to allocate risk to a third party, the insurance company.</p>
<p style="text-align: justify;">The <em>Titumir</em> case reiterates the law in New York that landlords and tenants are free to allocate the risks associated with commercial tenancy, including passing the risk on to the parties’ insurers. Indemnification and insurance language in such leases is important and usually dictates who bears the exposure for property damage or premises liability in the commercial setting.</p>
<p style="text-align: justify;">Thank you to Gabriella Scarmato for her contribution to this post. Please contact <a href="">Andrew Gibbs</a> with any questions.</p>


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