Put Limits on Tenant’s Right to Hire Its Own Cleaning Contractor

Generally, commercial property owners provide cleaning services to tenants. They typically hire and use a cleaning contractor that they choose. However, specialty tenants sometimes ask that they be allowed to hire their own, separate cleaning contractor. Tenants that have confidential information, such as banks and medical offices, and are concerned that a cleaning crew will have access to it, or tenants that have especially expensive merchandise, like jewelry stores, and are concerned about security, have been known to ask for this concession.

If a desirable tenant insists on having the right in its lease to hire its own cleaning contractor, you may have to give in. But that doesn’t mean that you have to compromise the way you operate your building. We’ll tell you how to limit a tenant’s right to self-clean. And we’ll give you a Model Lease Clause: Set Self-Cleaning Option Requirements that you can include in your lease with a tenant that’s negotiating for that right.

Take Union Labor into Account

“Owners like to provide all basic building services to tenants because it’s convenient, more efficient, and avoids problems with competing contractors,” says Chicago attorney and Insider board member Neil T. Neumark. This also helps an owner avoid union issues, he notes. For example, in and around Chicago, cleaning contractors for the most part use union labor, says Neumark. “And that’s a concern,” he stresses. For example, an owner wouldn’t want a bank tenant to hire a nonunion contractor to do its cleaning because the owner’s union contractor would be upset if any nonunion personnel were providing services to the building. Owners often collectively bargain cleaning contracts, and in some areas, it’s not unusual for the Building Owners and Managers Association (BOMA) to collectively bargain these contracts on behalf of many office owners, he says.

“So if you have a collectively bargained contract for the entire building, it could be difficult to carve out certain spaces, such as the area leased by the bank tenant, in the building where the cleaning contractor isn’t entitled to provide cleaning services,” Neumark explains. Be prepared to handle issues with your cleaning contractor for the building if you allow another contractor to come in.

Address Practical Points

Giving a tenant a self-cleaning right will require you to go through the same checklist that you did when hiring your building’s cleaning contractor. “You have to ensure that the tenant’s contractor has all of the things that are necessary for anyone to provide work or services in the building, including sufficient licenses, permits, and insurance,” says Neumark.

There’s also the issue of theft, says Neumark. Who will monitor this? If something is stolen from the tenant’s space, who is responsible, the tenant or the owner? “You can’t put everything in one clause in the lease,” he notes. Self-cleaning rights are property management intensive, he says. Things like the hours that the tenant’s cleaning contractor will have access to the space, who will have a master key, and how it will be provided, will be worked out directly with the tenant, its cleaning contractor, and the property manager. “There’s a myriad of issues that are management prerogatives in terms of specifics, because there are too many details for a lease,” says Neumark.

Include Four Key Items

Address four key items in the self-cleaning clause in your lease:

Prior notice. Make sure that the tenant gives you sufficient prior notice of its election to provide its own cleaning services. The notice period will vary from lease to lease, but usually ties into the owner’s existing cleaning contract for the building—that is, it should correspond to the notice that the owner must give its cleaning contractor before taking any space out of the contractor’s cleaning requirements. For example, an owner might set the notice period at 30 days because its own contractor requires a 30-day notice that it won’t have to clean the space of the tenant that has exercised its self-cleaning option. “Sufficient prior notice to the owner is a key element,” says Neumark [Clause, par. 1].

Approval. The owner should retain a right of reasonable approval of the tenant’s cleaning contractor. There’ll be some subjective and some objective criteria in the clause. The contractor must be a reputable, licensed, professional cleaning contractor having at least a certain number of years of experience, commonly three, in the geographical area and must adhere to the same standards that are currently maintained in the building. If the building is unionized, the tenant’s cleaning contractor should be required to employ only union labor. “Giving the tenant a self-cleaning option doesn’t give it a carte blanche right to choose any cleaning contractor that it may desire—it must meet these standards,” Neumark emphasizes [Clause, par. 1(b)].

Reduction of tenant’s operating charges. It’s not really fair for a tenant that’s providing its own cleaning services to pay a pro rata share of the building’s cleaning contract, Neumark points out. The tenant is paying the same share of the building’s operating expenses as the other tenants, but isn’t getting the benefit of that. And it’s now paying its own cleaning contractor’s fees as well. “That should be addressed in the lease’s self-cleaning clause,” says Neumark [Clause, par. 2].

When the tenant exercises its right to clean its own space, operating expenses from that point forward will exclude costs incurred to clean the tenant spaces in the building—but not all cleaning costs should be eliminated from the tenant’s operating expenses, just those attributed to cleaning tenant spaces within the building. That’s because the owner’s cleaning contract requires its contractor to clean not just tenantspaces, but also common areas, lobbies, artwork, and other items in addition to tenant spaces, stresses Neumark.

Practical Pointer: Occasionally, a tenant wants a higher level of cleaning for its space. That doesn’t mean that the tenant should automatically hire an outside contractor, creating work for it and you. Most contractors that are already working for the owner are willing and able to provide this level, sometimes at an increased charge. So, explore that option first.

Tenant may opt in and out. Make it clear that if the tenant exercises its self-cleaning option, you are no longer required to provide cleaning services to the space. “Your clause should give the tenant the right once it exercises that option, to opt out again,” Neumark advises. So if the tenant cleans its space for a couple of years, decides it’s too much of a hassle, and wants to go back to the owner providing that service, it can opt out, and by giving the owner sufficient notice, retrigger the owner’s obligation to again provide cleaning services, he says. Again, the notice period would typically relate to the owner’s existing cleaning contract, which would specify how much notice it would have to give its contractor to clean a new space in the building. Some contracts require but don’t always specify 30 days. In cases of large spaces, such as an entire floor of a building, the contractor may need to substantially increase its staff [Clause, par. 3].

Practical Pointer: If any tenant is given the option to provide its own cleaning services, make sure the standard lease for your building includes a secondary “gross-up” clause that allows you to “gross up” the cleaning costs for your building for any year to the level that would have been incurred had you provided full building standard services (such as cleaning services) to all tenants in your building. Your primary gross-up clause that would otherwise allow you to gross up for any year those components of operating expenses that vary based on occupancy levels of your building during such year will be of no help in this situation, since the tenant that’s providing its own cleaning services is, in fact, in occupancy of its space.

Insider Source

Neil T. Neumark, Esq.: Member, Dykema Gossett PLLC, 10 S. Wacker Drive, Ste. 2300, Chicago, IL 60606; www.dykema.com.