July 21st, 2011, By Dana Haugh
In a typical lease negotiation, the parties, the attorneys and the brokers focus only on the key financial aspects within the lease document. However, there are subtle and seemingly innocuous clauses that can cost the tenant a pretty penny long after the lease has been signed. Here’s a quick list of 5 Dangerous Lease Clauses:
5. REPAIRS AND MAINTENANCE
More so in industrial leases than an office, you’ll find that the tenant is significantly responsible for the upkeep of the building. While the landlords are typically responsible for the roof, four walls, floor and parking lot, you (the tenant) are responsible for heating, air conditioning and ventilation systems (HVAC), sprinkler systems, plumbing, electrical systems, dock doors, dock levelers, dock locks, dock seals, etc.
While this is customary, it can lead to significant cost if there are any unseen and/or undisclosed defects (latent defects). For example, suppose six months into your occupancy of the new space, you perform required testing of the sprinkler system and find that the sprinkler system cannot pass inspection. You will then be required to make what can be a costly repair- especially since this deals with fire code issues.
Landlords will invariably write the lease so that it is “as is”. It is up to you, the tenant, and your advisors to insist that the landlord warrants the serviceability of any key building components which will later become your responsibility to maintain and repair. With items such as a sprinkler system, you may be able to rely on independent, third-party inspections. On other items, you either have a choice of inspecting the building elements yourself, bringing in an engineer to do the inspections or preferably having the landlord warranting the serviceability of these key building elements.
Repairs and Maintenance Clauses are something YOU need to watch out for to save $$.