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Posts tagged Tenant Improvements.

Part 1 of this piece can be accessed here.

Specialty Improvements 

As mentioned above, the law is evolving to place greater obligations on landlords with respect to maintenance and repair. The landlords strike back by including onerous provisions in their commercial lease forms. Maintenance and repair of specialty improvements is no different. The form lease document, unless negotiated and revised by tenant’s counsel, will provide that the tenant is responsible for any specialty systems installed by or for tenant and exclusively serving the tenant. Tenants with complex data storage needs are often surprised to learn of the high cost of maintenance and repair. For example, some tenants may be surprised to learn of the expenses associated with older halon fire suppression systems that are increasingly obsolete, expensive to repair and even more expensive to remove.

Issues with HVAC

Disputes over specialized tenant improvements or exclusive heating and air conditioning systems are common in commercial leasing. Landlords and tenants often argue over maintenance and repair obligations, or whether or not such specialized tenant improvements can remain on the premises upon the expiration of the term or if tenant is obligated to remove the alterations at the tenant’s sole cost.

Landlords often require such alterations be removed and the premises restored to their original condition while tenants would obviously prefer not to have to incur such large move-out expenses. With respect to exclusive heating and air conditioning systems, typically the argument between landlords and tenants is whether or not the tenant must incur significant expenses maintaining and/or replacing a defective unit towards the end of the term at tenant’s sole cost for the benefit of the subsequent tenant of the premises. This article will discuss the typical approaches to these issues and offer suggested compromise language for office and retail commercial leases.