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Wins & Insights

Tenant Leasing Illustrated August 2019 Equipment Haikus

Equipment Haikus

Oddly enough, I missed this year’s annual Lunar and Planetary Science Conference in Houston, but I am told that in lieu of the required one-sentence summaries to describe their work, some scientists describe the complicated science in their papers with haikus.

So instead of “The Effects of Shock and Raman Laser Irradiation on the Maturity of Organics in Martian Meteorites” (something I have dabbled in a bit myself), the haiku version is:

Look at falling sky

Rock from big red rock in black

Sky to find life signs

They call them “scikus.”

You can’t make this stuff up.

Haikus, of course, are 17-syllable poems that originated in Japan, with three lines, the first and third line having five syllables and the second line having seven syllables.

It is said that in Japan haikus, much like our commercial lease provisions, are valued for their simplicity, openness, depth and lightness.

The practice at the Lunar and Planetary Science Conference apparently started as a joke but has now become a tradition.

The explanation is that “for all the stereotypes … a lot of scientists are jolly, imaginative people.”

I think the scientists just knew that the creatively challenged at Leasing Illustrated need help with newsletter topics.

Have no fear, attorneys can break out of stereotype too (well, maybe, kinda, sort of).

Introducing the “lease-ku.”

Found commercial space.

Organizational bliss.

Ugh! Leasing counsel?

Or, to express one’s appreciation:

Tenant saviors great

Justice abounds in my lease

Praise be Mintz and Gold

Yes, sometimes it is best to just sit back and let true art flow right over you.

Poetry in a commercial lease is when a landlord needs something from its tenant, but that does not happen too often.

A good example is that while tenants spend a good deal of energy focusing on limiting their removal and restoration obligations at the end of their lease term, sometimes a landlord will request that the tenant leave certain otherwise removable equipment.

Generally, this is equipment that benefits the building infrastructure, such as generators, cooling towers and fuel systems.

Some tenants are even able to monetize such equipment by selling excess capacity at a profit for the use of other tenants.

As the lease term expires, the tenant may not want or need such equipment and may be more than happy to pass it on to its landlord, but in such event the tenant must be careful to think like a landlord and do so in the least burdensome and most advantageous manner possible.

To ensure that your turn-over of equipment or other personal property at the end of your lease term flows like poetry from the Bard’s pen, consider the following five suggestions:

    • Waive surrender obligation for the equipment. Many leases require that the tenant remove equipment and restore the premises at the end of the lease term. This is particularly true of “specialty alterations”, i.e. alterations such as vaults, internal staircases, cafeterias, raised flooring and the like which are likely to cause a material incremental cost to demolish or remove in excess of a typical office tenant alteration. At a minimum, your landlord should waive any such removal and restoration obligations with respect to the equipment that you are transferring, much of which would otherwise likely be deemed a specialty alteration.
    • Clearly indicate the benefit. If you are providing your landlord with something it needs, then you should be entitled to even greater benefits in return.
        • You should require that your landlord waive all of your removal and restoration obligations under your lease. These obligations can be quite costly and time consuming and it is a very reasonable quid pro quo to eliminate this obligation for any and all of your alterations and equipment, over and above the transferred equipment, and whether or not specialty alterations.
        • You may want to consider having your landlord also waive your obligation to remove personal property. You may want to take some of your personal property to your next space (e.g., personal computers and other valuable equipment), but if your fixtures, furniture and equipment are old and tired and you intend to purchase new FF&E at your next space, this waiver can be of enormous economic value.
        • Although not common, if truly valuable you may be able to have your landlord pay for your equipment, perhaps in the form of additional free rent before your term expires.
    • Deliver “as is”. You should deliver the equipment in its “as is, where is” condition, with no representations or warranties of any kind whatsoever. Notwithstanding the benefits listed above, the delivery of your equipment is a windfall for your landlord, and you should not be burdened with potential liability after your lease execution date in terms of claims of misrepresentation as to the condition of such equipment.
    • Assignment of warranties. Your landlord may request that you assign any warranties and service contracts. Any such assignment should be made to the extent unexpired and again without any representation or warranty of any kind.
    • Terminate user agreements. You may have been one of the fortunate few tenants able to enter into user agreements with other tenants, such as for use of your generator or for condenser water from your cooling tower.
        • Ideally, your user agreements by their terms should terminate on the expiration of your lease. If not, it is preferable to terminate the user agreements rather than assigning such user agreements to your landlord. If your landlord wishes to enter into user agreements with the other tenants for the use of the equipment that you are leaving behind, then your landlord should enter into its own direct user agreements with such tenants.
        • If assignment is unavoidable, then you should try to assign such user agreements to your landlord without any representation or warranty of any kind. You may find that you will need to provide mutual indemnities pursuant to which you indemnify your landlord for any claims arising before the assignment and your landlord indemnifies you for any claims arising from and after the assignment.
        • We have seen landlords who require an indemnity even if the user agreements are not being assigned in order to make sure that if something happens between the execution of the agreement and the lease expiration date, the landlord does not get sued or dragged in. Although an understandable concern, the problem with such an indemnity is that anything can happen after the lease expiration date and your landlord can claim that it was part of some prior occurrence and try to drag you back in. One reasonable compromise is for you to agree to indemnify your landlord for any claim arising prior to the lease expiration date (or some reasonable short term period thereafter, such as three or six months) for which you have received written notice of a claim as of that date, combined with a covenant on your part to continue to maintain the equipment with the existing service agreements between execution of the agreement and the lease expiration date. Keep in mind that after the lease expiration date, such an occurrence is probably an insurable risk for your landlord but probably not an insurable risk for you.

Poetry in motion:

Equipment to go

Five suggestions most clever

Nirvana follows