USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
6.13 Restrictions on the Use of Real Estate Commercial leases typically contain “use” clause which describes the tenant’s permitted use of the premises. The scope of this clause is negoti - ated between the parties and is frequently influ - enced by their respective bargaining strengths. Leases usually specify certain prohibited uses or activities. Local land use and zoning laws may impose further restrictions on the tenant’s use of the premises. Retail tenants in a shop - ping mall or strip centre may seek to negotiate an “exclusive use” provision, where the landlord agrees not to lease other premises located in the shopping mall to a competing business. Some - times, with a financially strong tenant (such as an “anchor” tenant), the tenants’ exclusive use provision may extend to surrounding locations also owned by the landlord. 6.14 Tenant’s Ability to Alter and Improve Real Estate Commercial leases typically require the tenant to obtain the landlord’s written consent before the tenant is permitted to alter or improve the demised premises. Usually, leases also require that all plans, drawings and specifications be submitted to the landlord for its approval, and that the tenant ensures that all work be per - formed in a good and workmanlike manner and be free from defects. Tenants may try to negoti - ate that the landlord’s granting of consent will not be “unreasonably withheld, conditioned or delayed” , rather than being at the landlord’s “sole discretion” . 6.15 Specific Regulations Residential tenancies (apartment rentals) in urban areas are often regulated in various ways according to state and local jurisdiction, includ - ing with respect to rent control or rent stabilisa - tion, requiring lease renewals, prohibiting dis -
depending on the type of net lease (except that in “absolute” and “triple net” leases, the ten- ant is responsible for paying all of the operating expenses, including taxes). With respect to residential leases, the owner/ landlord usually pays all the real estate taxes While landlords purchase and maintain their insurance with respect to the property, it is stand - ard for commercial leases to require each tenant occupying a portion of the property to purchase and maintain – at its own cost and expense – specified levels and types of insurance. Where a single tenant occupies the entire property and is responsible for the various operating costs of the property – for example, under a so-called “triple net” lease – the tenant, and not the landlord, is responsible for purchasing and maintaining all required types of insurance. General liability insurance typically provides coverage for claims arising out of bodily injury or property damage suffered by third parties. Some general liability policies include a specific endorsement that provides limited coverage for fire damage to the leased premises, but this is typically limited and generally does not cover all types of damage or perils (eg, floods, earthquakes, etc) to the leased premises. Commercial tenants are usually required to pur - chase and maintain business interruption insur - ance. During the COVID-19 pandemic, however, insurers took the position that losses attribut - able to government-mandated shutdowns were not covered under their business interruption policies. In most litigations throughout the USA, courts largely sided with insurers’ decisions to disclaim coverage under tenants’ business inter - ruption policies. assessed on the property. 6.12 Insurance Issues
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