Building Better Leases Series – Use: Lessee Remediation, Lessee/Lessor Indemnification, Investigations & Remediations

Building Better Leases

It is the Lessee’s responsibility to act as soon as they are aware of any Hazardous Substances in, on, under or about the Premises. In other words, the Lessor does not have to wait for a formal notice or any government/overseeing body to begin “cleaning up” the area. The Lessee has an obligation to maintain, secure and monitor not only the Premises, but also the neighboring properties where a spill or incident may occur.

Because Hazardous Substances an incur high expenses, it is imperative that all Parties understand the implications. In addition, they should know if there have been prior problems with Hazardous Substances in or around the Premises in the past. If problems have arisen in the past, obtaining formal environmental assessments prior to the Start Date is helpful because it can serve as a benchmark for the condition of the property and eliminate or reduce the potential for disputes regarding causation should an environmental issue arise during the Lease.

The Indemnification clause is intended to protect the landlord from any financial losses or property damage that may or may not be caused due to the landlord. It states:

  • The Lessee agrees to take whatever steps necessary, regardless of cost or resources, to protect, defend and hold the Lessor, its employees, lenders and agents harmless against any financial loss, damage, liabilities, claims, penalties, or attorneys/consultant fees arising from or involving Hazardous Substances brought on to the Premises. All costs that the Lessor, its agents, employees and lenders may incur as a result of the presence of Hazardous Substances must be reimbursed by the Lessee
  • This protection does not include Hazardous Substances that migrated to the property from an incident that occurred on a neighboring property unless the Lessee was responsible for polluting the neighboring property
  • This protection includes, but is not limited to, injury of persons, property and/or the environment, and the cost of investigation, remediation, and restoration/abatement
  • The expiration of the Lease has no impact on this protection. It shall also remain in full force and effect even if the Lease is cancelled or terminated for any reason prior to the Expiration date. Unless specifically agreed to, no release given by the Lessor to the Lessee shall impact this protection

In the event the Lessee suffers loss or damage as a direct result of a pre-existing Hazardous Substance on the Premises, the Lessor will provide similar protection to the Lessee. The Lessor is required to make the same investigatory and remediation efforts that the Lessee is in its indemnification.

For any Hazardous Substances that exist on the Premises prior to the Lessee’s occupancy, it is the Lessor’s responsibility to incur the cost of any investigation or remediation required by the government. For any damage that occurs while the Lessee is using the Premises, it is the Lessee’s responsibility to cover the costs. Regardless of what happens, the Lessor is responsible for conducting the investigations and remediation. Who is responsible for paying the costs, however, will be determined by who is responsible for the pollution.