How to Avoid Liability if Power Goes Out

With the summer approaching fast, power outages can be a daily occurrence. If the power in your area is shut off, tenants with an axe to grind might try to sue you for any resulting damage to its equipment and business. Or the tenant could argue that it has been “constructively evicted—that is, the power outage in its space was tantamount to an eviction by you—and try to terminate the lease or demand a rent abatement, says Sacramento attorney Thomas F. Stewart. That's why you must make sure that your lease properly protects you from tenants that want to make you liable if the power goes out.

Three Protections

Check your lease to see if it has the following three protections. If it doesn't, you need to add them.

No liability for loss. Make sure that the lease states that you're not liable to the tenant for any loss or direct or indirect damage caused by a total power outage, no matter how long it lasts [Clause, par. a]. Otherwise the tenant might claim that you're liable in either or both cases.

No tenant remedies. While your lease may give the tenant remedies it can use if it's damaged by certain events, make clear that the tenant can't resort to any of these remedies if a power outage or deficiency caused the damage, says Stewart. For example, make it clear that a power outage or deficiency won't:

• Amount to an actual or constructive eviction of the tenant;

• Entitle the tenant to a rent abatement;

• Release the tenant from any of its lease obligations; or

• Let the tenant terminate the lease [Clause, par. b.].

Tenant waives law. Your state's current or future laws may let a tenant terminate its lease because of power outages and deficiencies at its space, says Stewart. To stop the tenant from using those laws against you, require the tenant to waive its right under any present and future laws that would let it terminate the lease because of any power outages or deficiencies [Clause, par. c].

Practical Pointer: A tenant might demand that you agree to be responsible for any loss or damage it suffers if the power outage or deficiency was your fault. Depending on the tenant's clout, you may have to give in on this.

Insider Source

Thomas F. Stewart, Esq.: Partner, Downey Brand LLP, 621 Capitol Mall, 18th Fl., Sacramento, CA 95814;(916)444-1000; tstewart@downeybrand.com.

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