Understanding Improvements and Betterments: Be Mindful of Lease and Insurance Provisions


...for the better, the original condition of property; or it enhances the quality of something. Examples of improvements and betterments are cabinets, counters, partitions, new flooring or ceilings, appliances, and built-in shelves or bookcases.

Keep in mind that the aforementioned terms, as well as who is responsible for restoring damaged improvements, often are subject to the particular wording of the lease agreement and a court’s interpretation of those provisions.

For example, in Chernberg v Peoples National Bank of Washington, 564 Pac. 2d 1137 (Wash.), the tenant operated a restaurant in a portion of a building located in Seattle. When the abutting building was razed, a former party wall 1 became exposed and was determined to be structurally unsafe and in need of substantial repairs by the local building department. Although the leased premises did not abut the exposed wall, the tenant requested that the landlord make the necessary repairs, estimated to cost between $30,000 and $50,000. The landlord refused to make the repairs and terminated the lease because of the unsafe condition of the building. The lease required the tenant to make repairs necessary to maintain the leased premises, except for the outside walls and other structural components of the building within the leased premises, but was silent as to which party was obligated to maintain the structural components of the building outside of the leased space. TheWashington Supreme Court upheld a lower court ruling concluding that there was an implied duty imposed on the landlord to make repairs mandated by government authority where such repairs arise from defective building conditions or are required for reasons of the public welfare.

However, in Ell & L. Invest. Co., 286 Pac. 2d 338 (Colo.), the court held that the lessee should pay for substantial alterations to avoid the threatened condemnation of the building, based on the lease language. The lease provided “that the lessors shall not be liable for the expense of making any alterations, improvements, or repairs to the demised premises”— and the court upheld that language.

It is difficult to provide any rule of thumb that might avoid disputes as to the meaning of lease provisions because circumstances will vary. However, it helps to make the lease provisions as clear as possible to reflect the intent of the parties.

Tenant’s Use Interest

It can be said that from the tenant’s standpoint, it is not the improvements and betterments that are insured, but rather the tenant’s use interest in them...

The term ‘improvements’ has been defined in a variety of ways. An improvement is anything that adds to the value of property; it changes, for the better, the original condition of property; or it enhances the quality of something.