2 ways a tenant can avoid immediate lease problems

Blog Post

In a sophisticated transactional world it can be easy to overlook two basic tenant concerns: (i) when possession of the space will be delivered, and (ii) the condition of the space on delivery.

Leases have a stated commencement date, but landlords often include a sentence stating that there are no penalties for the landlord’s failure to timely deliver the space (usually buried later in the lease). In addition, most landlord lease forms require that the tenant accept the space in its “as-is” condition.

A well drafted tenant protective lease will provide:

1. landlord penalties for late delivery of the space and an outside delivery date, after which the tenant can “cut bait” and terminate the lease; and
2. that the landlord is responsible to cure any latent (i.e., hidden) defects in the space and landlord representations and warranties that the space will be delivered: in broom clean (free of glass and personal property) and structurally sound condition; with all mechanical, electrical, plumbing and HVAC systems in good working order; free of all hazardous materials; and in compliance with all applicable laws relating to construction, occupancy, zoning, use and other pertinent matters. 

Furthermore, if the landlord is performing work in the space prior to delivery, a smart tenant will ask the landlord to:

• correct any “punch list” items which the tenant identifies as incomplete or improper;
• provide heightened construction warranties with respect to the landlord’s work; and
• assign any manufacturers warranties to the tenant.

Corporate users of space fight tooth-and-nail over economic incentives, rental rate, leasehold security, pass-through caps, and other “monetary” items, and should remember to pay attention to two straightforward and important concerns – what they are getting and when they are getting it.