Most tenants can’t afford the expensive testing necessary to find out whether hazardous substances are present on the premises they plan to lease. Too often, tenants rely on only the owner’s representations that the space is free and clear of any hazardous substances. That can be a costly mistake. But you can negotiate and draft lease language that’ll protect you from such an outcome.
One way to do this is to add an environmental warranty to your lease. This secures an owner’s promise, in writing, that the space is not contaminated by any hazardous substances. While no promise provides 100 percent protection, the warranty could add strength to your argument if you have to argue your case in court. Among other key assurances, the environmental warranty should make the owner specify two major things:
There is no contamination. Require the owner to acknowledge that the entire building or center isn’t or has never been contaminated by any type of hazardous substance. If you later discover that the owner was untruthful, you might be able to sue the owner for violating the terms of the lease.
Owner must pay cleanup costs. Demand that the owner agree to pay the cost of cleaning up any hazardous substances that were not created by your business. This demand might be met with some resistance, as hazardous substance cleanup costs are usually costly.
Also, make sure that lease requires the owner to indemnify you if you didn’t actually bring the hazardous substance to the property but for some reason you must pay for it.
For more key items and model language that you can use in your lease to ensure that you’re not left on the hook for environmental damage that wasn’t your own, see “Demand That Owner Include Environmental Warranty in Your Lease,” available to subscribers here.