Make Tenant Pay to Maintain, Repair Supplemental HVAC System

During lease negotiations, a tenant may demand the right to install a supplemental HVAC system in its space. The system may be needed to prevent the tenant's computers and other equipment from overheating.

If your lease is like those we looked at, it probably protects you from having to pay anything to install or run the tenant's supplemental system on a day-to-day basis. But what about maintenance and repair costs? Many leases we looked at had this costly loophole: They said nothing about who's responsible for any costs incurred to maintain, repair, and replace, if necessary, a tenant's supplemental HVAC system. And these costs can be significant.

Why You May Get Stuck Paying Supplemental HVAC Costs

You may think that the tenant should have to pay to maintain, repair, and replace its own supplemental HVAC system. But the tenant could argue that since the system is an improvement to the building, you should be responsible for maintenance and repair costs. What's worse, you may not be able to pass these costs on to your other tenants as an operating expense. Savvy tenants won't pay these costs because the supplemental HVAC system doesn't benefit them. So you may be stuck footing the bill on your own.

How to Get Tenant to Pay

To plug this loophole and protect your wallet, your leases need to specifically mention supplemental HVAC maintenance and repair costs. The lease should say that the tenant is solely responsible for paying any costs involved in maintaining, repairing, and replacing its supplemental HVAC system while the lease is in effect, advises Sacramento attorney Thomas F. Stewart. That way, there's no doubt about who's responsible for those costs.

Here's some Model Language you can use in your leases. Add this language to the clause dealing with the tenant's right to install a supplemental HVAC system: CLLI0060

Model Lease Language

During the Term, Tenant shall, at its sole cost and expense, maintain and repair in a first-class condition (and replace if necessary) such supplemental HVAC system.

Practical Pointer: You should also check the maintenance and repair clause in your leases, says Stewart. This clause might say that you're required to maintain and repair certain equipment, which may include the tenant's supplemental HVAC system. If so, have your attorney redraft your maintenance and repair clause to exclude the tenant's supplemental HVAC system. Then there will be no possibility of conflicting clauses in your leases, Stewart says.

CLLI Source

Thomas F. Stewart, Esq.: Member, Downey Brand LLP, 555 Capitol Mall, Ste 1050, Sacramento, CA 95814; (916) 444-1000; tstewart@downeybrand.com