Plugging Loopholes

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Landlord shall have the right to enter tenant’s space at any time to examine the same, and to make repairs, replacements, and improvements [emphasis added].

By Sujata Yalamanchili, Esq. and Elizabeth A. Holden, Esq.

Co-working spaces look like cool, hip, innovative spaces, so you may have wondered if you can do your job in one of those spaces. Could a law firm or just an individual attorney sit at a table for a day, type away, and drink the free coffee or beer?

When you negotiate a lease with a tenant, you and your attorney try to cover all your bases—drafting provisions that protect you in every conceivable circumstance under which the tenant would breach the lease during the lease term. However, one situation isn’t as common as other types of breaches, so you might forget to include language to cover it.

During the economic downturn several years ago, contraction options—which let tenants give back part of their space during their leases and pay a lower rent—became popular because downsizing was one way for tenants in trouble to scale back costs. But two now-common commercial real estate trends have made the contraction option desirable for tenants that aren’t in financial trouble.

Unfortunately, fires, floods, and other casualties can happen at the shopping center or office building you own. If you’ve signed typical leases with your tenants, they probably place some limits on your restoration obligations. But after a casualty, it may not be cost effective or practical for you to restore the tenant’s space or your building or center.

Tenants who have a high electricity consumption can pose problems that you might not have considered when negotiating your leases. And a tenant that uses a typical amount of electricity now could need more later, or sublet or assign its lease to a high-power tenant. So, the message should be in neon lights for you: It’s crucial to negotiate and draft your lease provisions to protect against a tenant’s high power consumption.

Continuing advances in technology have made it easier than ever for commercial real estate owners to have the most effective security equipment for their properties. But upgrading and increasing security measures is expensive. And although the right security plan can save you money from vandalism, theft, or liability for accidents or crimes, it also has the potential to blow your budget. You can pass through to tenants the costs of increased security measures, though. Here’s how to do it using your lease.

Performing due diligence on a prospective tenant is one way to try to determine whether the tenant is financially viable. But what if you end up leasing to a tenant that proves to be a risk, no matter how careful you thought you were when researching it? One example of a risky tenant is one that’s merely a “shell” company—that is, a company that serves as a vehicle for business transactions without itself having any significant assets or operations.

A strong tenant forces you to give it a self-help right—that’s the right to step into your shoes to do important repair, maintenance, or replacement work if you fail to do that work. But suppose you have warranties on your roof and other items that restrict who can perform repair, maintenance, or replacement work and which materials can be used. Should the lease bar the tenant from doing self-help repair, maintenance, or replacement work on any item that’s covered by a warranty?

When a lease ends, you’ll want the tenant to completely remove any interior and exterior signage it has at its space. But that doesn’t always happen. Sometimes the tenant fails to remove some or all of its signage, leaving the job for you. Other times, it removes the signage but leaves behind a mess—such as dangling electrical wires—that’s not only dangerous but unsightly.