Advanced Leasing Strategies: Landlord Representations Worth Fighting For

It might surprise you that the vast majority of commercial leases in circulation do not contain any meaningful landlord representations about the condition of their building. In fact, virtually every lease requires the Tenant to take the building AS IS, and expressly disclaims against the existence of such representations. This could lead to unintended costs, or worse, impaired use.

Would you buy any other product on those terms? 

The importance of asking for basic landlord representations is easily overlooked when you are combing through an 80-page lease. It’s difficult to decipher the “missing pieces” during the negotiation process. The truth is that, if requested, most landlords are willing to afford certain representations about their building. Here are a few to consider:

Landlord represents to Tenant that:

• No Violation of Laws: Landlord has not received any written notices from governmental authorities citing violations of existing law affecting the building which have not been subsequently cured. See also Advanced Leasing Strategies: The Fight over Compliance with Laws – It’s not that bad.
• Good Condition: The premises will be delivered to Tenant vacant and broom clean, in good condition, and with all building systems serving the Premises in good working order.
• No Hazardous Materials: To Landlord’s actual knowledge, there are no hazardous materials in the project which are in violation of existing environmental laws that would interfere with Tenant’s use of the Premises or safe access to and from the premises.

These are reasonable “asks”. If the landlord resists, there may be an issue with the building that the landlord is unwilling to disclose. You don’t want to find out after occupancy that the A/C doesn’t work, the elevator is shut down, or that there are significant environmental concerns with the property.

Next time, add some basic representations to your LOI so that they are not forgotten during negotiations. At a minimum, the initial “ask” may lead to an advance discussion about these areas of concern before you expend significant resources negotiating a lease.

Derek A. Ridgway is a seasoned commercial real estate attorney with more than 25 years of experience. He is a Partner in Rimon’s San Francisco and Menlo Park offices. His clients look to him for advice in all aspects of real estate, leasing, business and construction transactions. Read more about Derek.

Rimon has 47 offices across five continents. The firm is widely known as being at the vanguard of legal innovation. The firm has been repeatedly recognized by the Financial Times as one of North America’s most innovative law firms. The firm’s Managing Partners were both named ‘Legal Rebels’ by the American Bar Association’s ABA Journal and have spoken on innovations in the practice of law at Harvard and Stanford Law Schools. Rimon and its lawyers have also received numerous awards for excellence, including from Best Lawyers and Chambers.