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In the Spotlight: Renovation of Existing Buildings

By Monica Mathews Reynolds
September 26, 2007

As commercial landlords in cities nationwide continue to look toward renovating or converting their commercial properties to other uses, and in particular into residential condominiums, many do not fully consider the dynamics between the existing tenants and the conversion process, which can result in decreased profits for the entire conversion or renovation project. Often, the interests of the existing tenants and renovating landlords are irreconcilably adverse to each other. Any landlord that fails to consider the 'cross-purpose dynamics' between the existing tenant's interests and its own interests in renovating or converting the property places itself in a common trap. Unsuspecting landlords that may think they are undertaking a simple and profitable conversion find that the renovation process can prove costly and fraught with contentiousness and hostility. Careful consideration of a few key issues can help landlords be sensitive to and avoid problems that arise from the cross-purpose dynamics inherent in many commercial renovations.

1) Be Prepared to Meet Obligations to the Existing Tenants.

Not every tenant can be per- suaded to vacate its premises be- fore its lease terminates, even when the landlord offers incentives. Consequently, in situations where commercial landlords will be renovating or converting a building that is already occupied by existing tenants, one important consideration for landlords is that they will be obligated to continue to provide services and maintain the building in reasonably good condition while, at the same time, they are tearing it down and rebuilding it. While the landlord's responsibilities vary from situation to situation and are necessarily dependent upon the specific property, landlords can expect that they will be required to continue to keep some things the same or consistent throughout the term of the renovation for the benefit of the existing tenants, notwithstanding the fact that this complicates or runs contrary to the renovation plan.

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