• April 17, 2017

Condenser Water

Cheat Sheet

Condenser Water

Condenser Water 800 450 Leasing REality | Commercial Real Estate Education
  • Landlord Advocates: If landlord is willing to allow its tenant to have installed, at tenant’s own cost, a water cooled supplemental air-conditioning system, subject to the capacity of the building’s water tower, landlord should limit the amount of tonnage the tenant can receive (e.g., eight (8) tons to sixteen (16) tons).

Tenant Counteraction: Either delete the tonnage limit or, alternatively, negotiate the right to an additional amount of tonnage within the first one (1) to three (3) years of the lease term.

  • Landlord Advocates: Indicate in the lease that tenant will bear the costs of purchasing, maintaining, operating and repairing the supplemental air-conditioning system (and for those who prefer to push the envelope a bit, require the unit to be delivered in good working order at lease expiration).
  • Landlord Advocates: The connection of the supplemental air-conditioning system to the building condenser water source shall be performed by landlord’s building contractors, at tenant’s sole cost and expense, including, without limitation, reasonable installation and engineering costs incurred by landlord in connection with same.

Tenant Counteraction: Items to potentially negotiate include:

1) Having the right to have tenant’s own contractor connect the system;
2) adding language that the rates must be competitive and/or specify a cap on such costs; and/or
3) either delete the engineering costs of landlord or request a cap on same.

  • Landlord Advocates: Tenant must agree to pay landlord for its use of condenser water at a base rate (i.e., approximately $350 to $750 depending on the market) per year per rated ton of cooling capacity of the supplemental air-conditioning system.

Tenant Counteraction: Negotiate for a lower rate (or no cost) for the initial year or two subsequent to the installation of the system.

  • Landlord Advocates: The base rate should be subject to reasonable proportionate adjustment for increases in the actual out-of-pocket cost to landlord in connection with the creating and furnishing of condenser water over the established charges which exist as of the lease commencement date (and in no event shall the base rate decrease below the initial rate).

Tenant Counteraction: Add language that the rate cannot increase for the first three (3) years subsequent to the rent commencement date of the lease.

  • Landlord Advocates: In order for the tenant to have the right to tie into the building’s condenser water loop, tenant must pay an initial “tap-in fee” (approximately $2,500.00 to $5,000.00 depending on the market) for its supplemental air-conditioning system.

Tenant Counteraction: Negotiate for no tap-in fee, a reduced rate and/or payment of the fee in monthly installments over a one to two year period.