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Death and Disability Clauses (Part 2)

Death and Disability Clauses (Part 2)

One of my litigation colleagues recently pointed out to me that my sample provision for a Death and Disability Clause posted in a prior blog entry could be susceptible to a future dispute. Here is the provision again:

In the event of the death of ____________ (the “Critical Person”), or in the event the Critical Person becomes disabled or unable to perform his/her customary duties for Tenant, Tenant shall have the option of terminating this Lease upon thirty (30) days’ written notice to Landlord. The effective date of such termination shall be the thirtieth (30th) day following delivery of such written notice. On such termination date, Tenant shall surrender the Premises to Landlord in accordance with this Lease, this Lease shall terminate and neither party will have any further obligations with respect to this Lease.

This provision works if the Critical Person dies or becomes seriously disabled. Under those circumstances, a landlord could not reasonably dispute the condition of the Critical Person. This provision offers a simple, basic protection to the Tenant.

However, the disability could fall within a gray area. What if the disability is temporary? What if the disability is not serious? Who makes the determination that the Critical Person is disabled and unable to perform?

These are all valid concerns. I have drafted the following clause to address these ambiguities:

In the event of the death of ____________ (the “Critical Person”), or in the event the Critical Person becomes Disabled (as defined below), Tenant shall have the option of terminating this Lease upon thirty (30) days’ written notice to Landlord. The effective date of such termination shall be the thirtieth (30th) day following delivery of such written notice. On such termination date, Tenant shall surrender the Premises to Landlord in accordance with this Lease, this Lease shall terminate and neither party will have any further obligations with respect to this Lease. For purposes of this section, “Disabled” shall mean the inability of the Critical Person to perform his/her customary duties for Tenant for a period of at least one hundred eighty (180) consecutive days. In the event the Landlord disputes whether the Critical Person is Disabled, the Critical Person shall submit to examinations by two medical doctors, one selected by the Tenant and the other selected by the Landlord. The two medical doctors shall examine the Critical Person and determine whether it is more likely than not that the Critical Person will be unable to perform his/her customary duties for Tenant for a period of one hundred eighty (180) consecutive days from the date of the examination. If the two medical doctors agree, their decision shall be binding and final. If the two medical doctors disagree, they shall select a third medical doctor, whose determination shall be final and binding.

Prior to using any language or concepts from this blog entry, consult with an attorney.

Ryan Rosensteel is a real estate and construction attorney licensed in Arizona. You can contact him at ryan.rosensteel@azbar.org.

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