Why Are Landlord and Tenant Indemnity Obligations Different in a Commercial Lease?
Indemnity provisions are an important component of commercial lease agreements, defining the extent to which each party is responsible for damages, claims, and liabilities arising from incidents related to the leased property. In essence, an indemnity provision is a contractual obligation where one party agrees to assume responsibility for specified claims or damages. While at first glance, it may seem fair for indemnity provisions to be fully reciprocal, this is rarely the case. Instead, commercial leases typically impose broader indemnity obligations on tenants than on landlords due to key differences in access, control, and responsibility.
Typical Indemnity Obligations in a Commercial Lease
In a standard commercial lease, the tenant is typically required to indemnify the landlord for damages and claims resulting from incidents that occur within the leased premises as well as claims arising from the tenant’s negligence or willful misconduct. This means that if an employee, customer, or third party suffers an injury within the leased space whether or not caused by the tenant’s negligence, the tenant bears the responsibility to cover the associated liabilities.
By contrast, the landlord’s indemnity of the tenant is typically limited to claims arising from the landlord’s negligence or willful misconduct. This discrepancy in indemnity obligations reflects the differing levels of access and control between landlords and tenants.
Why Indemnity Provisions Are Not Fully Reciprocal
While equal indemnity obligations may appear fair, landlords and tenants assume different roles in a commercial lease. The following factors explain why indemnity provisions are frequently structured in an asymmetric manner:
1. Tenant’s Primary Control Over the Leased Premises
Once a commercial lease is executed, the tenant assumes possession and control of the leased premises, conducting business operations within the space. Because the tenant exercises direct control, they are in the best position to prevent accidents and mitigate risks. In contrast, landlords typically do not have regular access to or oversight of the tenant’s day-to-day operations. As a result, landlords require tenants to indemnify them against claims arising from the tenant’s use and occupancy of the premises.
2. Tenant’s Business Activities and Invitees
Tenants are responsible for bringing customers, employees, vendors, and other invitees onto the property. The activities of these individuals, particularly within the leased premises, pose risks that are most appropriately allocated to the tenant. If a visitor slips and falls inside a retail store, for example, the tenant—not the landlord—is in the best position to implement safety measures and prevent such occurrences. Accordingly, landlords require tenants to assume liability for incidents involving their invitees.
3. Landlord as the Property Owner
Even though tenants maintain control over their leased premises, landlords remain the legal owners of the property. This ownership status often results in landlords being named in lawsuits arising from incidents within the leased premises, even when the tenant is at fault. A plaintiff may view the landlord as a financially stronger defendant and attempt to recover damages from them, regardless of whether the incident stemmed from the tenant’s negligence. To mitigate this risk, landlords typically require tenants to indemnify them against claims that arise from the tenant’s operations or use of the property.
Conclusion
The asymmetry in landlord and tenant indemnity obligations in commercial leases is not arbitrary—it reflects the practical realities of control, access, and risk allocation. Tenants, as the parties in direct control of their leased premises, bear primary responsibility for incidents occurring within their spaces and for third parties they invite onto the property. Meanwhile, landlords limit their indemnity obligations to areas under their direct control and to claims arising from their own wrongful conduct.
