Get 11 Lease Protections When Leasing Furnished Office Space

During the pandemic, some of your tenants may have abandoned their office space to work from home, leaving the premises fully or partially furnished. Now that the leasing market is returning to something approaching normal, leasing these furnished offices may prove to be a windfall for your business. The problem is that many, if not most standard office leases are designed for leasing unfurnished space. So, you may need to revise your lease to address the unique legal issues that arise when furnishings are part of the package, especially if leasing furnished space isn’t part of your normal business model.

The good news is that a veteran New York City leasing attorney who has represented landlords in a number of these transactions has crafted a thorough lease clause that you can easily adapt for your own use.  

THE 11 THINGS TO INCLUDE IN CLAUSE

Leasing an office that’s already furnished may lead to disputes over the furniture’s suitability, maintenance, ownership, and removal, among other things. That’s why you need a special lease clause that addresses all of these issues. Specifically, like our Model Lease Clause: Address Special Legal Issues in Lease for Furnished Space, there are 11 things your own lease clause should cover:

1. Tenant’s Acceptance of Furniture

First, have the tenant acknowledge that it’s accepting the premises in a fully furnished condition. Create a list and perhaps a photo of each item of furniture provided and attach it as an exhibit to the lease. To prevent subsequent complaints over the furniture’s quality or suitability, have the tenant acknowledge that:

• It has thoroughly inspected the furniture;
• It’s satisfied with its physical condition and that it’s clean, functional, and in good order;
• It understands that the landlord isn’t a furniture manufacturer or distributor; and
• It hasn’t received and isn’t relying on any landlord statements, representations, or warranties about the furniture [Clause, subsec. 1].

2. Tenant’s Duty to Maintain Furniture

Require the tenant to maintain the furniture in a “first-class” manner and, if necessary, replace it if it’s stolen or damaged. We’ll delve more into the replacement obligation later (see paragraph 6 below) [Clause, subsec. 1].

3. Disclaimer of Landlord Warranties

Reinforce the non-reliance language of subsection 1 by spelling out that the landlord hasn’t made any:

• Warranty or representation about the design, condition, quality, workmanship, suitability, or functionality of the furniture; or
• Warranty of merchantability of the furniture for any particular use or purpose [Clause, subsec. 2].

4. Tenant’s Acceptance of Risk of Loss

Complete your warranties defense wall by indicating that the tenant has agreed to waive the benefits of any and all implied warranties and representations it may have received from the landlord and bear all risk of loss for the furniture [Clause, subsec. 2].

5. No Landlord Responsibility for Furniture Maintenance

Spell out that the tenant assumes all responsibility for the physical condition of the furniture and keeping it clean, functioning, repaired, in good order, and insured at all times and at its sole expense [Clause, subsec. 3].

6. Tenant’s Duty to Replace

Make the tenant responsible for replacing any item of furniture that’s stolen or damaged, at its sole expense, with an item of identical dimension, weight, style, color, and quality. Require the tenant to give you a written description and photo or video of any replaced item [Clause, subsec. 4].

7. Tenant’s Acknowledgement of Landlord’s Ownership

Have the tenant acknowledge that even though it must insure the furniture, it recognizes that the furniture is the landlord’s and not its own personal property. Reserve the right to demand and the tenant’s obligation to deliver any security agreements, financing statements, or other documents confirming your ownership of and title to the furniture at any time in a format acceptable to you [Clause, subsec. 5].

8. Tenant’s Duty Not to Encumber

Ban the tenant from removing the furniture from the leased premises or doing anything resulting in a lien, claim, or encumbrance being placed against it [Clause, subsec. 5].

9. Bar on Removal After Lease Ends

Get the tenant to agree to leave all of the furniture in the premises in the physical condition required for maintenance when the lease ends [Clause, subsec. 6].

10. Landlord’s Right to Relinquish

Even though the furniture is your property, you should have the right to relinquish it any time. Have the tenant give you unqualified power of attorney to execute any bills of sale or other legal instruments in the tenant’s name that are necessary to effect the transfer of ownership in the tenant’s name [Clause, subsec. 7].

11. Tenant’s Duty to Remove Relinquished Items

State the tenant’s agreement to accept all transferred furniture “as is,” without warranty or representation, and remove those items from the premises immediately after ownership passes. Also require the tenant to repair any damage to the premises caused by the removal at its sole expense [Clause, subsec. 7].