Spell Out Your Right to Shut Down Electricity

Shutting down the electricity in a tenant’s space may become necessary at some point, either because of circumstances in the center or building, such as repairs or an upgrade to the electrical system, circumstances out of your control, such as an order from the utility company, or an emergency situation like flooding or a fire. But if your lease doesn’t carve out your right to electricity shutdowns, you could be on the hook for damage they cause to a tenant’s business.

Carve Out Right to Turn Off Power

If you don’t have a right in your lease to shut down the electricity, your tenant could argue that its lack of electrical power is a lease violation, giving it the power to resort to remedies like withholding rent or, in the worst case, trying to terminate its lease. It could argue that turning off the electricity is tantamount to evicting it from its space. It could also sue you for damages based on lost business or damaged inventory it sustained during the electricity shutdown.

You can avoid tenant lawsuits and damage claims over electricity shutdowns by giving yourself the right in the lease to shut down electricity in any of the above situations. Like our Model Lease Clause: Avoid Damage Claims from Electricity Shutdowns, your lease should include the following protections:

Limit notice of shutdown. Ideally, you’ll want the right to shut down electricity at any time with no advance notice. But the tenant will want reasonable advance notice of the shutdown so it can make the necessary contingency plans.

As a compromise, agree that you’ll give a set number of days’ notice whenever possible. Then, if the shutdown is within your control—for example, you’re scheduling an electricity upgrade—you’ll give the tenant notice. But in situations in which giving notice is impossible, you won’t be obligated to do so. Notice may be impossible if the shutdown results from a fire or an order from your electricity provider to shut down the electricity immediately [Clause, par. a].

How much notice should you give? Start by agreeing to give only two days’ notice. But be prepared that a tenant might insist on up to five days’ notice.

Apply right to more than safety measures and repairs. Don’t just give yourself a shutdown right for safety measures and repairs. Make sure it applies if you’re altering, connecting, upgrading, reconnecting, or relocating the electrical system. If you don’t spell out all these situations, the tenant may argue that the protections in the clause apply only when the shutdown is related to a safety measure or repair and not, say, a system upgrade. You may even want to try to add “or for any other reason”—but don’t be surprised if a tenant wants to delete this [Clause, par. a].

Cover work done anywhere in building or center. Don’t limit your shutdown right to work you’re doing in the tenant’s space. It’s just as likely that you’ll have to shut down the electricity to the tenant’s space when you’re working elsewhere in the building or center—such as in another tenant’s space or a common area [Clause, par. a].

Don’t agree to a shutdown only after business hours. Ideally, you’ll want the right to shut down the electricity at any time, regardless of the reason for the shutdown. But the tenant will most likely demand that you shut down the electricity after business hours only, to minimize the inconvenience.

Don’t’ agree to limit the permissible times for a shutdown. Remember that this may mean paying overtime for employees or outside workers. Plus, if the shutdown involves something outside your control, you’ll have no control over the time it occurs.

As a compromise, agree that you’ll use “reasonable efforts” to shut down the electricity after business hours only [Clause, par. b]. But make exceptions for a shutdown in two situations outside your control:

• When it’s required because of an emergency [Clause, par. b(i)]; and
• When it’s required by a utility company, electricity service provider, or a government agency [Clause, par. b(ii)].

Limit Your Liability to Tenant

You’ll want to start out saying in the lease that you won’t be responsible for any damage the tenant sustains due to the shutdown [Clause, par. c]. But expect a savvy tenant to balk at this. As a compromise, give the tenant a very limited rent abatement right. Let it abate its rent only if: (1) the electricity shutdown continues for more than 10 consecutive business days or occurs on more than 20 out of 60 consecutive days; and (2) as a result of the shutdown, the tenant can’t and does not use all of its space for those days. Expect the tenant to insist on an abatement right if it can’t use all or a material part of its space. If you agree to this compromise, you would let the tenant abate the rent based on how much of its space is unusable and unused for any days the shutdown continues after the 10 or 20 days [Clause, optional lang., par. d].