For a landlord’s business to thrive, they must be able to attract quality tenants when leasing out commercial property. To do this, they must ensure the property is in tiptop shape before the commercial tenant begins to work out of the space. Despite this, issues of property damage can still crop up over time. One of the most frustrating issues that can arise during a tenant’s stay is water damage. Knowing who is responsible for the damage to a leased commercial property can help landlords be better prepared when the unexpected happens.

Dealing With Water Damage in a Leased Commercial Property 

Water damage is one of the most frustrating issues for owners of rental commercial real estate. This particular type of damage, no matter from a burst pipe or flood, can cost a lot of money to fix, and impair the long-term value of the property. Regardless, leaks and spills are common issues that will likely need to be dealt with at some point. While certain insurance policies can help mitigate such damage, it’s important to understand whether or not the landlord or the tenant is on the hook for the damage.

Landlord and Tenant Responsibilities for Property Damage

As in a residential lease, commercial property leases should outline the responsibilities required of both the landlord and tenant throughout the lease term. While some responsibilities remain the same regardless of the type of leased property, each lease has unique qualities that should be reviewed carefully before a tenant moves in. For example, some commercial leases are known as triple net leases, where the commercial tenant is responsible for most, if not all, repairs. Other commercial leases, however, generally have a clearer division of duties: 

Tenant duties 

In a commercial lease, the tenant is usually responsible for damage to anything that belongs to them in the leased commercial space, for general wear and tear damages, and for items that break due to the regular use of the property. If the tenant has brought in an appliance that winds up leaking and causes damage to the property, the landlord is often not responsible. The tenant, on the other hand, would be charged for repairs to the property and would also be responsible for fixing their appliance. 

Essentially, any water damage that occurs to the property due to the tenant’s actions is their responsibility to fix. This includes damage that results from the tenant’s neglect of the property or even their failure to notify the landlord of a water issue when it first occurs. Additionally, if the tenant does not take measures to minimize the damage, such as shutting off valves to stop a leak, they may also be responsible for additional damages caused.

Landlord duties 

Under Texas law, a landlord or property owner has the primary responsibility to ensure their rental space is safe for a tenant to use. A landlord has a duty to repair or remedy certain damages if a tenant is current on rent payments, lets the landlord know about a damage issue promptly, and if the tenant did not directly cause the damage. This is true for instances of water damage as well, as landlords must ensure the essential plumbing in the property is adequate and functioning properly. 

Landlords must also regularly inspect the property to make sure the plumbing and drainage are in good working condition before turning the space over to the tenant. Additionally, the landlord is responsible for the proper care of the plumbing and pipes. If there is a problem, such as a burst pipe resulting from the landlord’s failure to maintain the property, the tenant cannot be held responsible for any resulting damage. 

When water damage occurs at a leased commercial property due to a flood or natural disaster, landlords are also responsible for the damage. Because the landlord is the owner of the property, it generally falls under their purview to take responsibility for property damage caused by storms, hurricanes, and other unexpected weather events. However, the landlord is not responsible for any damage these events inflict on the tenant’s property contained inside the commercial space.

Water Damage and Commercial Property Insurance 

Even though the responsibilities for dealing with property damage are generally outlined in a commercial lease, landlords should also ensure they have adequate insurance coverage in place to protect their investment. While landlords and rental property owners may feel fully protected by a landlord insurance policy, they will more than likely need to obtain multiple policies to adequately insure against water damage, including:

Commercial Property Insurance 

Commercial property insurance is incredibly important for landlords to obtain. This insurance covers damage to the premises of the rental property as well as the items located within it, such as equipment, furniture, supplies, and fixtures. It can also cover the costs associated with the repair or replacement of stolen, damaged, or destroyed property. Commercial property insurance also insures the property against claims of water damage specifically due to leaks or burst pipes.

Flood Insurance 

When a hurricane or other severe storm hits a commercial property, the possibility of water damage through flooding can be a great concern. Landlords need to know that coverage for flood-related damage after a storm is generally not included in standard landlord or commercial property policies and must be purchased separately as an endorsement. This is especially true in Texas and other coastal states with high flooding activity throughout the year. This specific type of coverage can be purchased through the Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program or a private flood insurer.

Insurance Coverage Attorneys

Landlords must ensure their commercial property is protected from water and any other type of damage; however, even if the responsibilities between the landlord and tenant are clearly defined and the landlord maintains the necessary insurance to protect the property, they can still be taken advantage of by insurance providers. Insurance companies often utilize bad faith practices after policyholders file valid claims for property damage. If you are a commercial property owner of rental space and have filed a commercial damage claim only to have it be wrongfully delayed, grossly underpaid, or denied, the attorneys at Raizner Slania can help. Contact us today to see how we can best assist you with your claim.

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