Avoid Disputes with New Tenant Over Abandoned FF&E

If a tenant moves out and leaves behind fixtures, furniture, and equipment (FF&E), you may decide to leave them in the space because they make it more attractive to prospective tenants. But that can lead to trouble once a new tenant moves in. The new tenant may think that it owns the FF&E and might try to remove or sell them. And your lease might not stop the tenant from doing this.

To plug this lease loophole, make sure your lease, like our Model Lease Clause: Get Control Over Abandoned Fixtures, Furniture, and Equipment, spells out who controls those items.

Include 11 Protections in Lease

To avoid disputes with a tenant over FF&E that the previous tenant left in its space, add the following 11 protections to your lease:

Protection #1: Identify fixtures, furniture, and equipment in space. Require the tenant to acknowledge that the abandoned FF&E are in the space. And attach an exhibit to the lease that describes those items in detail [Clause, par. a(i)]. This prevents the tenant from claiming that it installed them.

Protection #2: Say tenant accepts them “as is.” Require the tenant to accept the abandoned FF&E “as is" [Clause, par. a(iii)]. This way, you’re not required to put them in a better condition.

Protection #3: Don’t warranty title. Don’t make any representations or warranties about the ownership or condition of the abandoned FF&E [Clause, par. a(ii)]. You want to avoid any conflicts if the previous tenant returns to claim ownership of them. And you won’t be responsible for repairing them if their condition deteriorates.

Protection #4: Say you can stop tenant’s use. To keep control of the abandoned FF&E, have the tenant agree that it can use them only until you tell it to stop [Clause, par. a(iv)]. This puts the tenant on notice that you have ultimate control over them. You can pull the plug on the tenant’s use of them at any time.

Protection #5: Bar sale or transfer. Bar the tenant from selling or transferring the abandoned FF&E you’ve listed [Clause, par. a(v)].

Protection #6: Get removal right. Get the right to remove the abandoned FF&E from the space whenever you want to [Clause, par. a(vi)]. Otherwise, the tenant may try to stop you from doing so until it moves out. Be aware that the tenant may demand that you give it advance notice if you want to remove the abandoned FF&E during the lease. It's fair to give five business days’ notice [Clause, par. a(vi)].

Protection #7: Bar rent abatement. Say that the tenant isn’t entitled to any rent abatement if you remove the abandoned FF&E or stop the tenant from using them [Clause, par. a(vii)]. The rent shouldn’t be tied to the tenant’s use of these things.

Protection #8: Make tenant responsible for any repairs. Make the tenant responsible for the repair and maintenance of the abandoned FF&E during the lease—including all repair and maintenance costs [Clause, par. b]. After all, since the tenant is benefiting from using these things, it should be responsible for their upkeep.

Protection #9: Require your approval of replacements and improvements. A tenant may want to improve the abandoned FF&E—say, by adding upgrades or replacing certain parts. Require the tenant to get your prior, written approval before doing so [Clause, par. c]. Otherwise, you might end up with fixtures, furniture, and equipment that are less attractive to prospective tenants later.

Protection #10: Require return in good order. Require the tenant to return the abandoned fixtures, furniture, and equipment, with their replacements and improvements, to you in good order when its lease ends [Clause, par. d]. This will prevent the tenant from walking off with those items or returning them in a dilapidated state.

Protection #11: Make tenant responsible for damage. Make the tenant solely responsible for any damage done to the abandoned fixtures, furniture, and equipment [Clause, par. e]. This way, you have no obligation to pay any of the costs of fixing the damage.

Insider Source

Kenneth Klassman, Esq.: Partner, Horwood Marcus & Berk Chartered, 500 West Madison, Ste. 3700, Chicago, IL 60661; www.hmblaw.com.