Dairy Queens and Lease Repairs

I read recently that some dairy farmers, in an effort to keep their dairy cows stress free and at peak milk production, offer their cows climate controlled barns, soothing classical music, water beds or memory foam mattresses, nutritionist crafted meals and back scratching sessions.

As one farmer said; “there is nearly always a line at the backscratcher.”

Holy cow, no kidding! Give commercial real estate attorneys a little classical music and back scratchers and we can efficiently churn out more incomprehensible lease clauses!

The article did point out that after the cows’ milk production cycles are over in three to seven years, most of these “Dairy Queens” become ground beef, so maybe on balance I will stick with commercial leasing.

But there is one “yoga farm” in Pennsylvania that lets its cows live out their lives to a ripe old age pushing around beach balls. That beats the barbeque and sounds better than most senior partners are treated at large law firms.

We cannot all be cash cows, but sometimes commercial tenants would like to be spoiled just a little bit and have someone else perform required maintenance and repairs.

Unfortunately, just as for no apparent good reason landlords do not provide back scratchers for their commercial tenants, most leases put the onus on tenants to perform some maintenance and repairs and, not surprisingly, some leases place too broad of an obligation on the tenants in this regard.

Tenants need to protect themselves and steer clear from overly broad lease provisions that push the envelope too far in this regard.

While a tenant should be responsible for the maintenance and repair of its own personal property and improvements, and possibly building systems within its premises (or outside its premises but exclusively serving its premises), it should not be responsible for structural or other building system maintenance and repairs, all of which should remain a landlord obligation.

Ultimately, it is the landlord’s building and the tenant should certainly not be responsible for capital repairs (not even in most instances as operating expense escalations passed through to tenants).

So, make sure to milk your lease maintenance and repair provisions all that you can by following these six suggestions:

• Define your responsibility. It is reasonable and customary for you to be responsible for the maintenance and repair of all leasehold improvements within your premises (often including restrooms if you occupy the entire floor and any private restrooms), and your personal property, fixtures and equipment. Qualify this obligation as being subject to reasonable wear and tear, and damage from casualty and condemnation, and specifically exclude those repairs for which your landlord is responsible.

• Limit customary expansions. Many leases will make you responsible for repairs (even outside your space) to the extent necessitated by you or your contractors. It is not worth spending too much time chewing your cud over these fairly customary requirements, but these should be limited to repairs arising from (i) performing alterations, (ii) installing or operating your property or equipment, (iii) moving your property or equipment in or out of the building or (iv) negligent acts and, where there is a duty to act, omissions.

• Define your landlord’s responsibility. Your landlord should be responsible for the maintenance and repair of all public (i.e., lobbies, hallways and other common areas) and structural portions of the building. “Structural” should be defined broadly to include the roof, exterior walls, foundation, windows and glass, parking lots, garages, grounds and landscaping. Your landlord should also be responsible for the building systems serving your premises, at least until the point of entry into your space. Your lease will likely exclude from your landlord’s responsibility repairs for which you are specifically responsible pursuant to any of the express provisions of your lease.

• You may wish to include specific requirements for common areas, including an obligation to periodically paint, re-carpet and/or re-pave.

• You may also want to require your landlord to be obligated to retain a reputable manager with experience managing similar office buildings (and at commercially competitive rates, particularly if such manager is an affiliate of your landlord).

• Provide a standard. Require that your landlord’s repairs and operation of the building be at least equal in quality and class to those typical of other comparable buildings (e.g., first class office buildings in the geographic area) and made in compliance with all insurance and legal requirements.

• Allow for use of your own contractors. Your landlord may require approval of your contractors to perform such maintenance or repairs, but such approval should not be unreasonably withheld, conditioned or delayed (or your lease should provide for an approved list of contractors that can be supplemented over your lease term). Your landlord may require that repairs to structural portions of the building or building systems be performed exclusively by contractors your landlord designates, but then require that such contractors perform at commercially competitive rates.

• Limit reporting obligations. Some leases will require that you promptly notify your landlord of the need for any structural or building system repairs, which is reasonable provided that you have no liability of any kind for any failure to notify your landlord of any such need for repairs (the ultimate obligation to monitor for such repairs should rest with your landlord).

Mintz & Gold has assured me that I can push around a beach ball in the office as long as I like provided the leases keep coming. Sounds like a comforting retirement plan and as groundskeeper Carl Spackler (Bill Murray) said in Caddyshack, “so I got that going for me…” Follow the suggestions above, and you will have going for you an equitable lease maintenance and repair provision, and that’s no bull.