Use Lease to Manage Liability & Financial Risks for Mass Shootings & Terrorist Attacks

We’ll give you 10 tips for minimizing liability risks from shooting sprees and terrorism.

• Aug. 3, 2019: Walmart, El Paso (22 dead, 24 injured)
• April 3, 2018: YouTube Headquarters, San Bruno, Calif. (1 dead, 4 injured)
• Oct. 1, 2017: The Mandalay Bay Hotel, Las Vegas (59 dead, 422 injured)
• June 12, 2016: Pulse Nightclub, Orlando (50 dead, 53 injured)

These are just a few of the more than 300 mass shootings that have taken place in the U.S. since 2000. More often than not, these incidents take place on commercial property and lead to legal action against the landlords and tenants at the site.

The good news is that most commercial leases include provisions addressing building/property safety and security. The bad news is that these standard clauses tend to focus on traditional crimes like vandalism, theft, and small-scale assault rather than mass violence and terrorism. We’ll explain the liability risks and give you 10 lease revisions landlords and tenants should consider making to ensure more effective prevention and response to these threats.

Landlord Liability Risks

Historically, landlords generally weren’t liable for criminal acts committed by third parties on their property absent special circumstances. But things have changed dramatically, even before 9/11. Landlord liability for third-party criminal acts can stem from three different sources:

Common law duty to ensure safety of premises. Under common law—that is, law made by courts via case rulings—landlords have a duty to ensure the safety of the common areas and parts of the premises they control. If the landlord doesn’t safely maintain these areas and somebody gets hurts as a result, they can be sued for negligence. This duty has evolved to include responsibility for third-party criminal acts to the extent they were reasonably foreseeable. Today, such cases against landlords have become common and often run into the millions of dollars—for example, the lawsuits filed by victims of the 2017 Mandalay Bay mass shooting against the Las Vegas hotel for not taking steps to prevent the gunman from stockpiling weapons and opening fire from the property.

Landlord’s assumption of duty. Landlords can also voluntarily assume the duty to ensure building/property security, even if they don’t intend or even recognize that they’re doing so. This can happen when the landlord agrees to include a lease covenant to maintain the premises in “a safe and secure manner.” It can also happen when the landlord advertises the building/property as being secure or its leasing agents make oral assurances of security to prospective tenants. In either case, the tenant can argue that it relied on the promise to its detriment and sue the landlord for damages.

Violation of statutory duty. Landlords can also be liable for crimes that happen as a result of their failure to comply with a specific safety statute or regulation—for example, a municipal ordinance requiring them to install an alarm system or use a specific kind of lock.  

MAKE 10 LEASE REVISIONS

In addition to ensuring you know and diligently comply with all your security duties, whether statutory, contractual, or common law, you can also limit your liability risks for mass shootings and acts of terrorism that occur on or directly affect your property, by implementing the right lease protections. Here are 10 recommendations, along with a Model Lease Clause: Minimize Liability Risks from Shooting Sprees & Terrorism, that you can use to implement them.

1. Promise ‘Access Control,’ Not ‘Security’ Services

As noted above, promising to provide security may become a guarantee that you must live up to. Merely including the phrase “security services” in the lease may be enough to expose you to liability, attorneys warn. Consequently, instead of “security,” promise to provide “access control” services [Clause, Sec. a].

2. List & Reserve Right to Modify Access Control Services

Define exactly what access control services encompass. “Make sure tenants understand that the role of access personnel is limited and generally includes no more than preventing loitering, solicitation, and panhandling in common areas and maybe reporting perceived security problems on the tenant’s behalf to the police or other authorities during regular business hours,” advises a California attorney. Also reserve the right to modify the listed services in your sole discretion upon giving the tenant proper notice [Clause, Secs. a and b].

3. List Building Safety Protocols

To further clarify tenants’ expectations, list (and require the tenant to cooperate with) your building safety protocols either within the lease or as an exhibit. Such protocols may include procedures for:

• Building entry and sign-in;
• Reporting security incidents; and
• Emergency response and evacuation [Clause, Sec. c].

4. Disclaim Liability for Access Control Slip-Ups

Make it clear that agreeing to provide access control does not in any way make you responsible or liable if the access control personnel screw up by admitting a person into the building who commits a criminal or terrorist act that harms the tenant. One way to do this is via an indemnity in which the tenant releases you from liability. Don’t be surprised if the tenant tries to limit the scope of the provision to keep you on the hook for acts of gross negligence or willful misconduct committed by access control staff [Clause, Sec. b].

5. Get Right to Enter Tenant Premises for Installing Security Measures

Standard lease clauses giving the landlord the right to enter the tenant’s premises to inspect the tenant’s compliance, show the property to prospects, install and remove pipes and ducts, and make repairs required under the lease may not be adequate to secure entry for installing new or additional security measures. So you may need to revise the clause to provide for this contingency.

6. Set Limits on Tenant’s Security Improvements

Tenants may want to install their own security systems. While landlords should be open to these arrangements, they also need to establish clear limits to guard against undue costs and disruptions:

• The tenant’s system must be compatible with the building’s security, access control, electrical, and other systems;
• The tenant must install, operate, and maintain the system at its own expense;

• The installation must meet any and all requirements set out in the lease’s alterations provisions; and
• The tenant must surrender the security system at the end of the lease in accordance with the lease surrender clause [Clause, Sec. d].

7. Get Right to Pass Through Increased Security Costs

Up to now, we’ve focused on measures to prevent violent crimes and terrorism. The lease should also protect against losses you may incur as a result of such an event. To start, reserve the right to pass along additional costs to tenants—for example, in the form of CAM increases for shopping center landlords or as a retroactive increase to the expenses allocated to an office building for the base year to reflect additional costs incurred in that year.

8. Incorporate Terrorism into Force Majeure Clause

Clearly specify whether mass shootings, terrorist attacks, and similar occurrences count as “force majeure” events triggering rent abatements and other relief provisions in the lease. In so doing, phrase the provision widely to include not only shootings and attacks taking place in or directly affecting the building/property but also national and even international occurrences resulting in a state of emergency, heightened security alert, or similar situations.

9. Limit Landlord Liability for Service Disruptions

You also need to protect yourself against liability if acts of mass violence or terrorism result in disruptions to vital services. For example, tenants may contend that these disruptions constitute constructive eviction and try to get out of their lease. While your lease may already have a clause purporting to relieve you of disruptions for “causes beyond your control,” you need to make sure that the latter phrase includes acts of mass violence, terrorism, and bioterrorism. Disruptions you want to account for include:

• Lack of access to the building or property—for example, government authorities seal off the neighborhood after a bomb goes off in the building down the street;
• Bad air quality caused by an act of terrorism or bioterrorism, such as the noxious fog that descended after the 9/11 attacks; and
• Mail, telecommunication, and other service delivery disruptions [Clause, Sec. e].  

10. Require Tenant to Carry Terrorism Insurance

Another potentially important issue to address is whether the tenant should be required to carry terrorism insurance, particularly if it’s leasing an entire office building or facility that could be a target for attack. While landlords need the protection, terrorism insurance is expensive and potentially hard to get. One possible compromise is to require the tenant to spend only up to a specific amount for coverage and have the landlord pay costs above the cap amount. The landlord’s liability should also be subject to a cap; if total coverage costs would result in exceeding the landlord cap, the tenant can’t get the policy.

Model Lease Language

[Tenant must get insurance coverage to rebuild the building after a casualty]. . . including coverage for terrorist acts, if such coverage is available, with limits and deductibles reasonably satisfactory to Landlord. Tenant shall be responsible for up to the first [insert amount, e.g., $0.25 per square foot] of such terrorism coverage; provided, however, that Tenant shall not carry any such terrorism coverage if its cost exceeds [insert amount, e.g., $1.00 per square foot].