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If a landlord is providing air conditioning and heat, the majority of the time the lease does not address what minimum temperature must be maintained by the landlord in the winter or what maximum temperature is permissible during the high temperature months.
In most office leases, HVAC is provided by a landlord on weekends.
The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) have a comfort chart of recommended maximum and minimum temperatures that should be maintained in a building.
Tenant advocates should either negotiate building temperatures, or request that the landlord comply with the chart of American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE).
Most office leases provide HVAC during the hours of 8:00 AM – 6:00 PM, Monday through Friday.
Tenant advocates should negotiate with the landlord to provide some combination of: (a) HVAC to tenant’s space from 8:00 AM- 1:00 PM on Saturdays; (b) for the landlord to install a supplemental HVAC system in highly used and/or “after-business hours” areas of tenant’s space; and/or (c) reduced after-hours cost for heat, ventilation and air conditioning.
Landlord advocates should insert language into its lease that provides that tenant shall be required at their own cost and expense to: (i) maintain the air conditioning system, equipment and facilities; and (ii) maintain an air conditioning service repair and full service maintenance contract with an organization approved by the landlord.
If the lease is silent on the issue, at lease expiration, the tenant automatically remains in possession of the entire A/C system.
Landlords should put into its lease that at all times the A/C system remains the property of tenant.
Landlord advocates should make sure that the lease provides that at lease expiration, tenant shall surrender the entire A/C System in good working order and condition to the landlord.
Tenants should try and negotiate that the landlord is responsible for any required replacement of the HVAC system, including without limitation, for major parts and components, to the extent that same is not caused by the negligence, wrongful acts or omissions of tenant.
In many leases, lighting and electricity through wall outlets will be provided by a landlord 24/7/365.
If a landlord charges for any electric usage in excess of 55-60 hours per week, tenants, at a bare minimum, should make sure that the electrical service through the electrical outlets is supplied to the space 24/7/365.
Generally speaking, a tenant’s utility expense would be greater if charged directly from the local utility company, rather than charged by the landlord.
From a landlord’s perspective, if electric is being supplied directly from the local utility provider and a space does not have direct meters in place to measure tenant’s consumption of electricity, the lease should provide that the cost to install and maintain the meter is on the landlord.
The use of sub-meters as a means of measuring a tenant’s electric or water consumption can act as a profit center for a landlord.
In a situation where the landlord provides electric and water to the tenant as measured through sub-meters, it is not uncommon to find a five percent (5%) to fifteen percent (15%) surcharge added to the cost of a tenant’s electric or water bill to cover not only the cost to landlord of having the meter read by a third-party, but also to cover what landlords like to refer to as their “administrative fees.”
In a situation where the landlord provides electric and water to the tenant as measured through sub-meters, tenants should make sure that any administrative fee charged by the landlord is added on to the landlord’s actual cost of purchasing the utility.
Tenant advisors need to confirm whether or not the landlord has sufficient power in the building to meet the tenant’s required electrical capacity, and if the landlord does, whether the landlord is willing to provide it at a reasonable cost.
A landlord advocate should state in its lease that landlord shall be liable or responsible to tenant for any loss, damage or expense which tenant may sustain or incur if either the quantity or character of electric services is changed or no longer available.
Landlords should insert into their lease that tenant covenants and agrees that at all times its use of electric current shall never exceed the capacity of existing feeders to the building or the risers of wiring installations.
Landlords should insert into their lease that landlord may never discontinue any of the utility services under any circumstance without a decrease in tenant’s rent.
Whether negotiating a lease for a new location or a renewal of a tenant’s existing location, and regardless of whether the deal is for an office, retail or industrial location, granting (or receiving) free rent needs to be part of the equation.
Factors which don’t impact how much free rent a landlord may be willing to give a tenant include: current market conditions; whether the lease is for office, retail or industrial space; the other concessions a tenant is seeking from the landlord; the financial strength of the tenant; and the length of the lease term.
Given that in most instances for retail tenants, the tenant (and not the landlord) is performing all or the majority of the initial installations to ready the premises for tenant’s occupancy at their own expense, retail tenants have a weak argument that the tenant should receive a larger amount of free rent.
In regards to retail transactions, given that in most instances the tenant (and not the landlord) is performing all or the majority of the initial installations to ready the premises for tenant’s occupancy at their own expense, tenants have a strong argument that it should receive a large amount of free rent.
Depending on the market, it would be unreasonable for a tenant to request 2-5 months of free rent on a 5-year deal, and 4-9 months of free rent on a 10-year deal.
An existing tenant renewing their lease shouldn’t ask the landlord for any free rent concessions.
Generally speaking, a tenant is usually able to receive more free rent from its landlord on its renewal than what they received at lease commencement.
A tenant can make it more appealing for a landlord to be generous with offering free rent by agreeing to bifurcate the free rent by spreading it out over a period of months instead of asking for it all to be granted up-front.
Given the many costs to a landlord if an existing tenant relocates to a competitor’s building, landlords should consider granting some type of free rent to a tenant on a renewal, though at a fraction of what they might have initially given at lease commencement.
Given that granting a tenant improvement allowance requires a landlord to go into its own pocket, most landlords would generally prefer to grant a free rent concession to a tenant, as opposed to an improvement allowance.
Generally, most landlords prefer to give a tenant an improvement allowance as opposed to a free rent concession.
Tenants should accept however the landlord chooses to charge them for costs associated with alterations or improvements to the building that are required to be made pursuant to law or regulation after the lease start date.
A landlord advocate should have language in the lease stating that if there is an uncured default by tenant, the free rent granted at lease execution will need to be paid back to the landlord.
A landlord advocate should include language in the guaranty that provides that in order for the principals of a tenant to be personally relieved of their obligations under a “good guy” or straight guaranty, they will need to pay their landlord the unamortized free rent concessions at the early termination date of the lease.
Tenants should include language in the lease that in the event there is an uncured default by tenant, tenant is required to pay back to the landlord the free rent granted at lease execution.
Tenant’s should be aware that a landlord’s concession dollars are fungible, so the more the tenant receives in free rent, the less they will receive in other areas from the landlord.
If a tenant is unsuccessful in deleting the requirement to payback the landlord any free rent granted at lease execution if there is an uncured default by tenant, they should attempt to implement a “sunset” provision in the lease, eliminating landlord’s right to recoup the free rent funds after a specified period of time.