Specify Which Alterations Tenant Can Make Without Your Consent

Many tenants need major improvements made in their space in order to accommodate their businesses. Franchisee tenants need space that looks a certain way, retail clothing stores need shelving, and restaurants might need built-in seating. This will probably be spelled out in the tenant improvements section or other sections of the lease. Major construction typically is a part of lease negotiations and owners will want to require the tenant to get consent before starting work and follow other requirements, such as using only owner-approved contractors, complying with all governmental laws, and complying with the plans and specifications approved by the owner.

On the other hand, some tenants don’t need a lot of work done in their space, but want to make smaller changes or updates. If you own many properties, you might not want to be bothered every time a tenant wants to install a lighting fixture. If your lease requires the tenant to get consent for any and all alterations, you’ll be asked for consent for minor changes that don’t impact the space or your ability to relet it to a new tenant when the tenant moves out.

To avoid headaches over being too rigid with consent requirements, you can give tenants the right to make certain alterations to their space. But don’t forget when drafting the lease to protect yourself by adding language that addresses the requirements for this type of work.

Specify Permissible Projects

You should strike a balance between allowing some alterations without consent and making sure that you don’t pre-approve work that could adversely affect building systems and structural elements. If the alteration is structural or involves a change to the building’s systems or components, you should retain the right to give your consent at your sole and absolute discretion.

“Clearly, an owner would want to do alterations that interfere with or involve structural elements of the building or base building systems itself—or have approval over how it will be done and by whom,” says Toronto attorney Stephen J. Messinger. He notes, however, that many owners aren’t concerned with interior alterations that are cosmetic in effect. “Interior painting, moving some of the interior fixtures in the space, or adding small equipment that relates to the tenant’s mode of doing business isn’t a concern for most owners,” Messinger explains.

Messinger points out that owners would typically want to know about exterior building work or work that might require the business to close down for some period of time or interfere with business at the center so the owner can determine whether and how that may be done, sometimes wanting to approve of or select the contractors. “On the other hand, an owner probably won’t be concerned about a tenant using its own staff to make alterations like hanging wallpaper,” Messinger says.

To protect yourself, ask your attorney about adding language to the lease that covers a scenario where a minor alteration could become an expense for you later after the tenant moves out of the space. “An owner could include language stating that it will determine at the owner’s option whether the tenant will, at the tenant’s expense, remove improvements—even including cosmetic changes,” Messinger suggests.

     Model Lease Language

Tenant will keep the premises in good repair and condition and is entitled to make minor or cosmetic alterations without approval from Landlord. However, any structural changes or alterations that affect base building systems will be approved in advance by Landlord.

Define ‘Minor’ in Lease

Minor alterations can depend on the type of the tenant’s store. “There are only so many kinds of alterations that could be considered ‘minor,’” says Messinger, “but an owner’s main concern should be changes that impact the space’s or building’s structure, like load-bearing walls or building systems.” To avoid confusion, in the lease, you can define the term “minor.” No matter how you actually define “minor,” make sure it conveys the idea that these types of alterations do nothing more than change the interior face of the premises, such as painting, wallpapering, and carpeting.

Insider Source

Stephen J. Messinger, Esq.: Partner, Minden Gross LLP, 145 King St. West, Ste. 2200, Toronto, ON M5H 4G2; www.mindengross.com.