Tenant Leasing Illustrated – May 2018 – Swing Space Poses

Swing space is alternate, temporary space which can allow a tenant to solve a short-term space and timing problem and allow its landlord to close a deal that might have otherwise been lost.

In today’s issue, we provide ten suggestions for commercial tenants when addressing swing space in a lease or license.

Swing Space Poses

My forays into the world of Yoga have not exactly been covered in glory.

In the one class that I tried with my wife Robin, I managed to let a band used for stretching fly out of my hands right into Robin’s face.

You can imagine how the rest of that class went.

Although walking around with a yoga mat would undoubtedly increase my street cred, I am more chimichanga than chaturanga.

Recently I learned about others feeling yoga stress who find relief by mixing beer and yoga class.

I realize that these are strange times (after all, my Mets are in first place), but yes, that is correct. Participants hold and sip a frosty pint throughout the class.

This has led to new poses, such as “the Drunken Row Boat” and “the Wobbly Tree”, taking mindfulness to a whole new level.

But think of all the stress just making sure that you do not spill!

And no, mixing beer and commercial lease drafting does not explain my finely tuned lease clauses (at Mintz & Gold we draft responsibly and always have one designated drafter to handle speiling and ; punctuation,)

Commercial tenants sometimes reduce stress by obtaining “swing space” from their landlord.

Swing space is space afforded to a tenant to alleviate a temporary need in conjunction with a longer-term lease.

For example, a tenant might need to move out of its current space to avoid holdover penalties but its new premises (or a portion thereof) may be occupied and not yet available.

Sometimes, a tenant is already in the building but needs alternate space as it renovates its existing space on a piecemeal basis.

Stressful all around. So, rather than relying solely on Namaste (prayer) or a craft six pack, the tenant’s conundrum can be solved if the new landlord offers some other space in the building (or nearby), often at a discounted rate, on a temporary basis.

The swing space can be addressed within the new lease or as a separate license agreement, but generally the newly negotiated agreement can serve as the basis for the short-term swing space occupancy (with certain modifications as set forth below).

In certain rare cases, the swing space is provided before the lease is finalized, in which case the parties will need to address all terms of the occupancy in a license.

Avoid being caught in a “Wobbly Lease” pose by following these ten suggestions when negotiating your lease swing space provision:

  • Specify the term.
    • Commencement. Be clear about when your swing space term commences. Often the term will commence upon execution of the lease, but it can occur sooner or later depending on the circumstances.
    • You may not be sure whether or not you will need the swing space and its main function may be as a security blanket. In this case, try to make the use of the swing space an option in your favor that can be exercised as needed.
  • And expiration. Some leases will provide that the swing space occupancy terminates either on a specific date or together with the lease commencement date. You must be sure to provide yourself enough time to move from the swing space to your new space after the new space is in proper condition for occupancy and you should not be subject to holdover penalties or double rent if you cannot vacate the swing space because your landlord has not delivered your new space.
  • Address costs. The fee for use of the swing space, or absence of any fee, should be clearly stated, and remember to pro-rate the charge for partial months.
  • Confirm services and cost. You will require electricity, elevators, HVAC, and other services and utilities and may be required to pay separately for some of these items and overtime services. Your lease should make clear the type and quality of services you are receiving as well as your obligation in terms of costs.
  • Limit extent to which lease terms govern. Use of the swing space will likely be in accordance with the terms of your just negotiated lease, but you need to exclude the obligation to pay fixed rent and inapplicable items of additional rent, any obligations to make long term repairs or comply with legal requirements (except to the extent required due to your own negligence or willful misconduct) and other inapplicable obligations. Your landlord will also want to exclude certain items, such as its obligation to pay construction allowances and your ability to make alterations or assign/sublet.
  • Require minimum delivery condition. Even if being provided “as is”, your swing space should be delivered vacant, free of all tenancies or other rights of possession, in accordance with legal requirements and with building systems in working order. Ideally, your landlord should also represent that there are no hazardous materials in the swing space.
  • Limit surrender responsibility. You should not have any restoration or removal obligations upon surrender other than with respect to alterations that you performed. You should only be obligated to return the swing space in the same condition, except for reasonable wear and tear, damage from casualty or condemnation, or other damage that is your landlord’s obligation to repair under your lease.
  • Cover FF&E. You will likely be obligated to remove your own fixtures, furniture and equipment and other personal property from the swing space upon the expiration of the swing space term. Sometimes FF&E will be included with the swing space, in which case your lease needs to clearly indicate if you now own the FF&E and must remove it at the end of the swing space term or if you are merely entitled to use the FF&E while in occupancy.
  • Address insurance/indemnity. You will undoubtedly be required to carry the same insurance as other tenants and occupants and to indemnify your landlord while in the swing space. The indemnity should be no more expansive than under your lease.
  • Limit holdover. You will generally be subject to holdover provisions similar to those in your lease (perhaps even more stringent since you may be filling a gap before the next tenant needs to start its work or move in). You should not be subject to penalties because of delays caused by your landlord (such as not timely delivering the new space as noted above). Try to limit your obligations in a manner similar to your lease but recognize that your landlord may have limited maneuverability.
  • Address brokers. It behooves both you and your landlord to provide mutual representations and indemnities indicating that no broker will be entitled to a commission with respect to the swing space (or indicating otherwise if that is not the case).

Woody Allen once noted that “eternal nothingness is okay if you’re dressed for it.” That thinking is probably as far as my mindfulness goes. Use the ten suggestions above and you will at least have swing space karma going for you.