Tenant Leasing Illustrated – Sept 2014 – Bridge Too Far

Bridge Too Far

This is painful to admit on many levels, but at the suggestion of our friends Dan and Laura, my wife Robin and I agreed to join them in taking Bridge lessons.

Bridge lessons?

It is bad enough that we are learning a card game that can be played at the retirement home, but one of the justifications was that the game is so complicated it is recommended to keep your brain sharp and fend off Alzheimers as you approach “a certain age”. Well, I think that was one of the justifications, I just cannot remember.

And, yes, it is certainly complicated, with more rules than the NBA salary cap, governing bidding, tricks, trump cards and my specialty, being the “dummy”.

Basically, two pairs of players play against each other (to preserve marital harmony, we are not teamed up with our spouse) and the players on the same team try to signal appropriate moves to their partners through their bidding. If you have a certain number of points in your hand you bid one thing, if you have a certain number of cards of one suit you bid another thing, all the time keeping track of what everyone else is doing so that you can win the most “tricks”.

I am not even sure what I just said, but it actually has been a fun way to spend time with friends and, thankfully, our variety includes an appropriate level of trash talking.

Although in the free-wheeling world of commercial real estate there is generally more of a focus on trash talking than rules, every lease does allocate relative responsibility between the landlord and tenant when it comes to compliance with applicable governmental rules, laws and regulations.

Tenants need to be careful because landlords often try to place too much responsibility on the tenant for such compliance, even when this might require that the tenant bear the cost of structural alterations.

Ideally, your landlord should be responsible for laws that apply to the property and your ability to use the premises as permitted under the lease. Your responsibility as tenant should be limited to permits needed to operate your particular business in the premises and your own alterations in the premises.

I bid you avoid being the dummy when it comes to compliance with laws under your lease by following these eight suggestions: 

  • Limit your obligations to your “particular manner of use” of your space. As opposed to your mere use in accordance with the permitted use under your lease, which should be a given and your landlord’s obligation.
  • Specify your landlord’s obligations. Many leases only cover the tenant’s compliance obligations, remaining silent about the landlord’s obligations. Your lease should specify that your landlord is responsible for compliance with laws affecting the structure of the Building, (e.g., roof, foundation, etc.), base building mechanical, HVAC, electrical, fire/life safety and plumbing systems and hazardous materials. Also have your landlord covenant that the premises will comply with applicable laws as of the commencement date (other than with respect to alterations that you perform).​
  • Cover the ADA. Your landlord’s responsibility should also specifically include the Americans with Disabilities Act as it relates to the building (think elevator call buttons), except with respect to work that you perform outside of your premises. You will be responsible for ADA compliance within your own space, although if your landlord is doing a “turnkey” buildout, then such buildout should comply with ADA requirements.​
  • Avoid obligations to make structural repairs or alterations. Some landlords will not agree to limit your responsibility to your manner of use of the space and will insist that you remain responsible for all compliance within your premises. In such instance, you should exclude responsibility for structural work except when required for compliance based on the following:​

○​  Your particular manner of use of the premises.​

○​  Any condition (e.g., alterations) created by you or at your request.​

○​  Breach of your obligations under your lease.​

○​  Uses outside the permitted use or outside the premises.​

  • Define “base building” systems. Your landlord may dispute whether various systems are “base building” systems. One compromise is to make a distinction between “vertical” systems (e.g. risers that run throughout the entire building) for which the landlord is responsible and “horizontal” systems (e.g., sprinkler distribution within your space) for which you are responsible.​
  • Address known specifics. For example, Local Law 26/04 in New York City requires substantial updates to sprinkler systems in many buildings over the next few years. This law has left many landlords and tenants scrambling to see how their current leases allocate this responsibility. With any impending change in the law, make sure that your lease (and/or your build out of the premises) covers the issue up front.​
  • Maintain the right to contest. You should have the right (at your expense) to contest by appropriate proceedings the validity or applicability of any law or requirement. You can expect that your landlord may require in connection with such contest that (a) it not be subject to criminal or civil fines or liens, (b) you provide some form of security and/or indemnification, (c) there is no violation of any mortgage or superior lease and (d) it not be prevented from obtaining any of its own permits or licenses.​
  • Require Landlord cooperation. Make sure your landlord is obligated to cooperate with you within agreed upon timetables in obtaining permits and approvals (including signing applications) even before approving any of your work. You do not want the landlord to use the permit signing process to extort additional benefits in exchange for allowing you to perform your work.​

Mark Twain once said “a clear conscience is the sure sign of a bad memory.” Follow the suggestions above and, notwithstanding the state of your memory, at least your conscience can be clear that you have properly addressed the compliance with laws provision of your lease.​