Craft Indemnification Clause that Protects Your Interests

December 7, 2016
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When you lease space from the owner of a shopping center or office building, it’s impossible to predict whether you’ll experience the unpleasant repercussions of accidents, injuries, or criminal acts at the property, and—unfortunately—the owner might try to attribute these to you as the tenant. These events can be costly. But you can plan for the worst and hope for the best, by using an indemnification clause in your lease.

An indemnification clause can ensure that you won’t be left paying the price for events that you didn’t cause or were out of your control. So what terms should you ask for in an indemnification clause?

One of the main things you’ll want to do is agree that you’re going to indemnify the owner for only things within your control. When events happen in retail or office business premises that injure or harm third parties, that party will sue you as the person occupying the place where the damage occurred, as well as the owner simply for being the owner of the building. But when both an owner and tenant are sued, if the tenant had control over the space where the event occurred, the tenant is seen as the guiltier party and so the indemnification clause in the lease would probably make the tenant indemnify the owner for any damages the owner must pay and its legal costs. From the owner’s point of view, to the extent that injuries arise from the use of the premises, it’s the tenant’s responsibility and, therefore, the tenant must make the owner whole if the owner is sued.

But this idea works in your favor if one of your customers or office visitors is injured in a common area. For example, there sometimes are fights between teenagers at a mall. If one of those teenagers is injured but the owner has control over the common area where it happened, the tenant should be able to ask the owner to indemnify it in the event that the injured party sues the tenant. Overall, the expectation is that the party who is responsible for things “in its control” will be responsible for accidents, injuries, and other events that prompt a lawsuit.

For more tips about what to include in your indemnification clause, and Model Language you can use in your leases, see “Protect Yourself from Paying for Mistakes That Aren't Your Own,” available to subscribers here