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Five Deadly Sins: Lease Clauses a Landlord Should Refuse to Negotiate Under Any Circumstances
When a landlord or its attorney prepares an initial draft of a lease on the landlord's form, it is expected that the tenant will simply sign the lease (but only if the tenant believes it has no leverage whatsoever), return the lease with handwritten comments, or, if the tenant's comments are extensive and it has taken control of the drafting process, return a black-lined copy of the lease that it has revised. What then begins is the long exercise of lease negotiation, where each side asserts its best positions with the hope of ending up with a lease with which each side can live. There are, however, five provisions the landlord and its attorney should not agree to modify. Such modification is tantamount to the commission of a deadly leasing sin. Here are the subject matters and sample lease provisions that should not be touched:
1. Hazardous Materials:
Neither tenant, nor any of tenant's agents, contractors, employees, licensees or invitees shall at any time handle, use, manufacture, store or dispose of in or about the Premises or the Shopping Center any flammables, explosives, radioactive materials, hazardous wastes or materials, toxic wastes or materials, or other similar substances, petroleum products or derivatives or any substance (collectively “Hazardous Materials”) subject to regulation by or under any federal, state and local laws and ordinances relating to the protection of the environment or the keeping, use or disposition of environmentally hazardous materials, substances, or wastes, presently in effect or hereafter adopted, all amendments to any of them, and all rules and regulations issued pursuant to any of such laws or ordinances (collectively “Environmental Laws”). Tenant shall protect, defend, indemnify and hold landlord harmless from and against any and all loss, claims, liability or costs (including court costs and attorney's fees) incurred by reason of any actual or asserted failure of tenant to fully comply with all applicable Environmental Laws, or the presence, handling, use or disposition in or from the Premises of any Hazardous Materials, or by reason of any actual or asserted failure of tenant to keep, observe, or perform any provision of this paragraph.
The length and depth of the hazardous materials clause arises because of the complex and constantly growing body of law that now places ultimate responsibility for hazardous materials on the property owner where the material was created, used, disposed, spilled, etc. This liability has forced numerous otherwise solvent landlords into bankruptcy through no fault of their own. It is not only imperative that this clause not be altered, but also that the person responsible for the lease determine what kind of business the tenant is engaged in and what its past record has been with regard to hazardous materials. This clause will receive significant interest from any prospective purchaser or lender and should not be altered without consulting professionals.
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