Hurricane Katrina's Unanswered Questions

Real Estate Law and Ethics... Images of Hurricane Katrina's destruction and the resulting humanitarian crisis shook us all last week. Over one million people displaced across Louisiana, Mississippi and Alabama. New Orleans, a city of 500,000 people, evacuated. Federal disaster declarations cover an area of 90,000 square miles, almost the size of the United Kingdom.

As the initial shock begins to wear off, we will soon turn our attention from alleviating human suffering to the Herculean task of rebuilding cities, re-establishing communities and reconfiguring the public infrastructure. How does Katrina impact commercial real estate?

If you were ordered to evacuate New Orleans, are you still obligated to pay rent? What amount of damage would free a tenant outside of New Orleans from paying rent? What if your building survived, but your retail customers fled?

Conversely, if you own net-leased property in the disaster area, can you collect rent, even though your building has been destroyed? Are you responsible for toxic waste deposited on your property?

Are there circumstances under which lenders cannot demand payment of mortgage obligations? What about brokerage agreements? If contingencies had been removed, would a commission be owed if a property were destroyed?

Although these are simple legal questions, I suspect that the answers will not be so easy. How should ethical or moral considerations affect the answer? What do you think?

-- Peter Pike