Leasing issues and provisions in the face of catastrophic loss: A post‐11 September discussion

The tragic events of 11 September 2001 have caused people in all walks of life around the world to pause and reflect about what is important to them. With the World Trade Center, one of the icons of global capitalism and New York’s skyline, reduced to a heap of burned and twisted rubble at ‘Ground Zero’ in lower Manhattan, the world of commercial real estate is undergoing a time of reflection in the wake of these unbelievable events. While the catalyst for this time of reflective analysis was at the same time both horrific and compelling, the careful consideration of relevant lease issues and of the need for disaster recovery planning that has resulted will help everyone to be better prepared for unexpected events of any kind in the future. The purpose of this paper is to identify three standard lease provisions that have always been important, but now bear even closer scrutiny in the aftermath of the catastrophic losses of 11 September. These provisions are: Casualty; Interruption or Unavailability of Services; and Insurance. Most form leases contain provisions that address these subjects and raise various issues that are ripe for re‐examination. This paper discusses how such issues might be analysed (or re‐analysed) in the aftermath of this senseless tragedy. Please note that the legal conclusions, practices and norms outlined in this paper are generalised from a United States perspective and, as such, the norms and potential solutions may vary in other countries and on a case‐by‐case basis within a country. Further, the starting point and, often, the ending point in the analysis of any leasing issue is the specific language of the lease, which itself is subject to any applicable laws of the relevant legal jurisdiction. It is important to consider the issues and analysis discussed in this paper in light of the specific market norms and laws of the jurisdiction which are applicable.