Taming the Tenant's Form of Lease: Common Landlord 'Fixes'

Landlord Self-Help

Provide for a right of the landlord to cure tenant defaults, with amounts expended recoverable as additional rent.

Reservation of Certain Rights by Landlord

Provide the usual reservation of rights by the landlord to change the name and/or address of the building, to install signage on the exterior or interior of the building, to grant exclusives, to enlarge the building, and the like.

Limitation of Landlord's Liability

Limit the landlord's liability to the value of its interest in the property.

Hazardous Materials

Provide that the tenant is responsible for and indemnifies the landlord against loss, damage, and remediation arising from a spill of hazardous materials caused in whole or in part by the tenant.

Rule Against Perpetuities

If the Rule is in force in your jurisdiction and the commencement date is not a date certain, the usual saving language should be added.

Alterations

These provisions must usually be bolstered to address mechanics liens, compliance with laws, and removal at the end of the term.

Mutual Waiver/Waiver of Subrogation

Be sure that these provisions effectively require both parties to look solely to their insurer, and not to each other, for recovery for damage to property suffered by them and that effective waivers of subrogation by their respective insurer are in place or will be obtained.

Casualty

Beware of a unilateral right of the tenant to terminate the lease if restoration will take more than a few weeks time; also, limit the “free rent” period after completion of the landlord's restoration to a period within which the tenant's buildout may reasonably be completed.

Condemnation

Provide for a separate award for the tenant for its moving expenses, unamortized cost of its buildout and fixtures and loss of good will; negate that the tenant has any claim for loss of its leasehold estate.

Survivability of Tenant Obligations

Provide for the tenant's monetary obligations, including all indemnities, to survive the expiration or sooner termination of the lease.

Conclusion

While the foregoing list is not exhaustive, it includes many of the more common “fixes” a landlord will wish to make when required to work from a tenant's form of lease.

Myles Hannan, a member of this newsletter's Board of Editors, is Senior Counsel with Linowes and Blocher LLP (www.linowes-law.com), located in Bethesda, MD.

Part One of this article discussed some of the major landlord “fixes” often required when working from a tenant's form of lease, i.e., remeasurement, rent, taxes, tenant self-help, default, mitigation, assignment, subordination, and estoppels. This conclusion continues the discussion with additional “fixes.”

Mortgagee Provisions

Include the usual disclaimer that mortgagees will not be: 1) bound by rent paid more than one month in advance, or by amendments to the lease not approved in writing by the mortgagee, or 2) liable for defaults of any prior landlord or for any security deposit unless received by the mortgagee identified as such.

Landlord Self-Help

Provide for a right of the landlord to cure tenant defaults, with amounts expended recoverable as additional rent.

Reservation of Certain Rights by Landlord

Provide the usual reservation of rights by the landlord to change the name and/or address of the building, to install signage on the exterior or interior of the building, to grant exclusives, to enlarge the building, and the like.

Limitation of Landlord's Liability

Limit the landlord's liability to the value of its interest in the property.

Hazardous Materials

Provide that the tenant is responsible for and indemnifies the landlord against loss, damage, and remediation arising from a spill of hazardous materials caused in whole or in part by the tenant.

Rule Against Perpetuities

If the Rule is in force in your jurisdiction and the commencement date is not a date certain, the usual saving language should be added.

Alterations

These provisions must usually be bolstered to address mechanics liens, compliance with laws, and removal at the end of the term.

Mutual Waiver/Waiver of Subrogation

Be sure that these provisions effectively require both parties to look solely to their insurer, and not to each other, for recovery for damage to property suffered by them and that effective waivers of subrogation by their respective insurer are in place or will be obtained.

Casualty

Beware of a unilateral right of the tenant to terminate the lease if restoration will take more than a few weeks time; also, limit the “free rent” period after completion of the landlord's restoration to a period within which the tenant's buildout may reasonably be completed.

Condemnation

Provide for a separate award for the tenant for its moving expenses, unamortized cost of its buildout and fixtures and loss of good will; negate that the tenant has any claim for loss of its leasehold estate.

Survivability of Tenant Obligations

Provide for the tenant's monetary obligations, including all indemnities, to survive the expiration or sooner termination of the lease.

Conclusion

While the foregoing list is not exhaustive, it includes many of the more common “fixes” a landlord will wish to make when required to work from a tenant's form of lease.

Myles Hannan, a member of this newsletter's Board of Editors, is Senior Counsel with Linowes and Blocher LLP (www.linowes-law.com), located in Bethesda, MD.