Detailed Definition
Indirect damages, sometimes termed consequential damages or severance damages, refer to the secondary or consequential losses that arise not directly from an initial act, but as a downstream product of that act. These types of damages go beyond the immediate effects and consider the additional impact and loss caused by an act or event.
In the context of real estate, indirect damages could include loss of rental income if a property becomes uninhabitable due to someone’s negligence, or the subsequent decline in business because of delayed construction work in a commercial property.
Examples
- Tenant Business Loss: A commercial property suffers water damage due to a contractor’s negligence, leading to the temporary closure of businesses in the building. The lost profit for those businesses during the repair period could be considered indirect damages.
- Loss of Future Rental Income: A rental property is damaged by fire due to a tenant’s negligence. The property remains uninhabitable for six months, causing the landlord to lose rental income during the repair period. This lost income constitutes indirect damages.
Frequently Asked Questions
What are indirect damages in real estate?
Indirect damages in real estate refer to the losses incurred as a result of an initial damaging event. These losses are not the immediate result but ensue as a consequence, such as loss of rental income, business disruption, or additional costs incurred due to delays.
How are indirect damages different from direct damages?
Direct damages are the immediate, direct losses that occur as a result of an event. Indirect damages, on the other hand, are secondary and occur as a consequence of the direct damages, potentially leading to further financial loss.
Can indirect damages be recovered in a lawsuit?
Yes, indirect damages can sometimes be recovered in a lawsuit. However, it often depends on the specific circumstances and the wording of any contract or lease agreements involved.
What is an example of consequential damages?
Consequential damages could include loss of future earnings, additional operational costs, or other business impacts following an initial damaging event, such as the inability to conduct business during property repairs.
What are severance damages?
Severance damages specifically deal with the decrease in value or the economic impact on the remaining segment of a property after a part has been taken or damaged.
Related Terms and Definitions
Direct Damages
Direct Damages: The immediate and direct losses caused by an act or event. Examples include the cost of repairs directly related to damage or the value of property theft but do not cover secondary losses.
Consequential Damages
Consequential Damages: Similar to indirect damages, these refer to secondary damages that occur as a consequence of the initial event. They include losses such as lost profits, reduced business reputation, and other subsequent losses.
Severance Damages
Severance Damages: These damages occur when a portion of a property is taken or damaged, reducing the value or usability of the remaining property.
Online Resources
References
- American Bar Association. “Indirect Damages and Severance Damages in Real Estate.”
- Legal Information Institute, Cornell Law School. “Types of Damages: Direct vs. Consequential.”
- Nolo Press. “Understanding Real Estate Terms and Definitions.”
Suggested Books for Further Studies
- Black’s Law Dictionary by Bryan A. Garner
- Real Estate Law by Marianne M. Jennings
- The Law of Real Estate Transactions by Alex M. Johnson Jr. and Jerry L. Anderson
