14.59 C. Problems With Older Or Traditional Commercial Leases

• Jurisdiction: New York

C. Problems with Older or Traditional Commercial Leases

Allocation of environmental liability in leases has proven to be problematic since many leases do not specifically address the environmental obligations of lessors and lessees. It is surprising how often contracting parties will resort to form agreements. Many forms that are publicly available today were drafted decades ago and are out of date, difficult to understand, and contain antiquated language. They are almost always too generic. They can sometimes serve as a decent starting point but are generally not a good ending point.

For example, older leases usually prohibit tenants from engaging in activities that will result in “waste or injury” to the demised premises. Since the discharge of hazardous substances can impair the property value and result in cleanup costs that exceed the value of the property, these anti-waste provisions could be relied upon to impose an obligation on a tenant to refrain from releasing hazardous substances onto the property and to remedy such contamination. However, because these provisions usually apply to only structures and the use or occupancy of the demised premises, arguably this obligation does not extend to subsurface or groundwater contamination that is technically not a part of the demised premises as well as USTs or PCB transformers that are excluded from the definition of the demised premises.

In addition, leases often have a general compliance with law clause, requiring tenants to abate any nuisances and to keep the premises in good repair. These provisions probably do not apply to contamination that predates the lease or contamination that migrates onto the site from adjacent properties, and probably are not broad enough to extend to friable asbestos, USTs, or PCBs in the building electrical system since these issues may be considered structural defects that are not within the...