Lease Lets Tenant Off Hook for Causing Careless Property Damage

What Happened: A retail tenant in Michigan moved out of the space in the middle of the year even though the lease didn’t expire until Dec. 31. It forgot to make provisions for regulating the heat when the weather turned cold, and a water pipe froze in late December. The landlord sued the tenant to recover the roughly $160,000 it paid to fix the resulting property damage. The tenant admitted that it carelessly caused the damage but denied responsibility for paying for it.

Decision: The Michigan court agreed and tossed out the landlord’s claims.

Reasoning: Simply stated, the lease didn’t make the tenant responsible for causing careless damage provided that the damage was insured. The landlord controlled the lease and could easily have included language making the tenant responsible for careless damage. But it didn’t do that, explained the court, pointing to two fatal clauses:

• The “Damage and Destruction” clause providing that the landlord would make repairs or restorations “at its own expense” if the premises “were partially destroyed or damaged by fire or other casualty”; and
• Above all, the “Waiver of Subrogation” clause saying that neither party would sue the other for damage or “casualty of whatever origin, to the extent that the same is covered by insurance.”

In fact, the water pipe damage was covered by insurance. So, it made no difference that the tenant’s carelessness caused the damage.

• R & W Riverview v. Family Dollar Stores of Mich., March 2019