Tenant Leasing Illustrated January 2021 If You Give a Moose Restoration Obligations

Hello,

Most leases require that the tenant surrender its premises at the end of the term in good condition (subject to ordinary wear and tear), with the tenant’s alterations and personal property removed and any damage from such removal repaired. Tenants need to limit such obligations to ensure that they do not end up responsible for readying a space for the next tenant when this work should be the obligation of the landlord.

In today’s issue, we provide six removal / restoration suggestions to cover when you reach the end of your lease term.

Sincerely,

If You Give a Moose Restoration Obligations

It is about time for Leasing Illustrated to formally salute the great nation of Canada, eh?

I realize that Canada will not let allow COVID ridden Americans to enter, and this is a nation with only two seasons (Winter and July), but when it comes to fine newsletter ideas nobody can beat our great northern neighbor.

For example, we have learned that a new road sign went up at Canada’s Jasper National Park in Alberta that reads “Do Not Let Moose Lick Your Car.”

Not the kind of sign you generally see in NYC’s five boroughs.

Besides, how exactly do you stop a moose intent on licking your car?!!

Apparently, salt is a vital part of a moose’s diet and that salt usually comes from salt lick deposits located in the Park.

The moose have discovered that they can get the same tasty treat from cars covered in road salt, but that discovery greatly increases the danger of a collision and damage to moose, drivers and vehicles.

For the moose it is like discovering that vat of Hershey’s kisses delivered to the office for the holidays and left in the lunchroom (back when there was a lunchroom, and there was an office and, well, you get the idea).

The Park recommends that drivers “keep beyond moose-tongue distance” but recognizes that “your options can be limited” once your car is in mid-lick.

Keeping beyond moose-tongue distance is good advice that I always try to follow (a special prize for anyone who can specify moose-tongue distance, metric or American standard).

Tenants might generally like to stay moose-tongue distance away from their landlord (brings to mind the Fiddler on the Roof blessing for the Czar… “May the Lord bless and keep the landlord… far away from us.”

But we have noticed lately that some landlords seem to be keeping their distance from their tenants when the tenants request an end of lease walk-through or other confirmation of the tenant’s end of term removal and restoration obligations.

Tenants should be wary of landlords avoiding clarity on end of term obligations perhaps in the hope of generating some additional revenue during these tight COVID times.

Most leases provide that upon the expiration of the term the tenant must surrender its premises in good order, condition and repair (subject to ordinary wear and tear), with alterations installed by or on behalf of the tenant and the tenant’s property removed and any damage from such removal repaired.

But the costs to return a space to its original condition can be prohibitive and certain demolition and restoration costs to ready a space for the next tenant should be the obligation of the landlord.

It is therefore good practice for tenants to limit such removal obligations in their lease to “specialty alterations” that are either particularly costly or difficult to remove or in excess of a typical office or retail (as appropriate) tenant alteration.

Examples of specialty alterations are alterations located outside of the space, cooking kitchens (not pantries), raised flooring systems, generators, fuel tanks and internal staircases and other material slab cuts.

It is also important to require that the landlord provide notice as to whether or not a particular specialty alteration must be removed at the time the landlord approves the plans for such specialty alteration so that there are no surprises later on.

Some leases put the onus on the tenant to request in writing that the landlord make such determination as to removal of the specialty alterations at the time the plans are approved.

The problem for both tenants and landlords is that when the term expires ten or fifteen years later it may be difficult to track down written evidence that can clarify which party is responsible for potentially huge removal and restoration costs.

As you approach the end of your lease term, lick the removal/restoration problem with the following six suggestions:

  • Read your lease. Step one is to determine the parties’ relative obligations under your lease. What are you obligated to remove at the end of the term? Is your obligation limited to specialty alterations and did either you or your landlord have any particular notice obligations? You must first quantify the extent of your potential exposure.
  • Comb your records. If your lease requires your landlord to provide written notice regarding the removal of specialty alterations, then the burden of proof is on your landlord. If your lease requires that you request such determination of your landlord then the burden of proof is on you. Carefully review your files to locate the necessary evidence (and throughout the term remember the importance of good record keeping).
  • Schedule a walk-through. The best way to confirm where you stand with your landlord is to walk through your space with your landlord’s representative and agree (in writing if possible) as to what stays and what must go, as well as which party is responsible for any removal and restoration. Your landlord’s representative will likely not have read through your lease and may try to expand your obligations to fit his or her needs, but a frank discussion at the space provides a starting point for negotiations.
  • Try to shift the burden (but avoid phantom removals). Many tenants include in their leases or try to negotiate at the end of the term an ability to shift the removal burden to the landlord by agreeing to pay the reasonable cost thereof. The advantage of such an arrangement is that the time necessary to do the work will not eat into your lease term (or put you at risk of a holdover if the work is not timely completed) but the danger is that you may end up paying for a removal that never happens.
  • One approach to avoid such a “phantom removal” is to require your landlord to obtain competitive bids to remove any alterations required to be removed under your lease and for you to post the cost in escrow. If your landlord does not remove such alterations within an agreed upon period of time, or removes them and there are excess funds, such sums should be returned to you. This type of arrangement is of course easier to put together if provided for in your lease.
  • Your landlord should provide reasonable back-up showing how such monies were spent and any disputes should be subject to determination by a neutral arbitrator.
  • Don’t be bullied. Even in pre-COVID times, it was not unusual for landlords to try to shift removal and restoration obligations onto their tenants in order to save costs. Although a negotiated solution is always best, if you are comfortable that your interpretation of your lease is correct it may be worth fighting in court to avoid unnecessary costs and obtain the return of all security deposit funds.
  • Retain wanted items. Be careful to make sure that can keep any desired specialty alteration (e.g., a generator, satellite dish or HVAC equipment) and make sure that there is no limitation on your ability to remove your own valuable equipment and trade fixtures.

The Moose licking warning is not the only unusual Jasper National Park announcement. The Park recently tweeted to warn residents “not to hang Christmas lights in open spaces so they won’t get tangled up in elk antlers.” Sage advice no doubt but we would never want to get in the way of an elk in the holiday spirit. Follow the suggestions above and you will not get all tangled up in your restoration and removal provision.