by Charles J. Levin, Esq. (www.landlordlaw.com)
The following is a general discussion of some legal/business points that an endodontist may want to raise in discussions with legal counsel at the outset of lease negotiations for office space. This material is provided by Charles J. Levin, Esquire, a Tampa, Florida legal firm specializing in landlord representation. No attempt is being made to outline all relevant legal/business issues, but only some of those that are frequently overlooked when negotiating a lease for endodontic office space.
This discussion considers office building, flex and shopping center space, but obviously some points are relevant only to one type of space. The following is provided with the understanding that we are not engaged in rendering legal, brokerage, accounting or other professional services by offering this document. Legal advice or other professional assistance is always advised when negotiating a lease and the services of a competent professional should be sought in every case. (See full Disclaimer/Copyright notice.)
Discussion of Legal Issues
1. Conflicting Uses
1.01 Are you aware of any tenants, prospective tenants, occupants or prospective occupants in the building who:
1.01.01 Practice or may practice any form of dentistry?
1.01.02 Operate or may operate in a manner that will cause any vibration, noise, odor, public demonstration, picketing, or other nuisance that may interfere or tend to interfere with or disturb my dental practice?
1.01.03 Operate or may operate any sexually explicit, pornographic, or offensive business or conduct their business accordingly?
1.01.04 Utilize or may utilize for its employees or customers a large number of parking spaces at any one time during any weekday? Who hold classes, seminars, training sessions, “boiler rooms”, “overuse” the facilities, or have waiting lines?
1.01.05 Hold or may hold sidewalk sales, tent sales, parking lot sales, or similar events?
1.02 Do you have provisions in all current leases and will you agree to place provisions in future leases that prohibit the above?
1.03 Do other tenants have reserved parking spaces or the right to require you to reserve parking spaces for them, their employees and/or customers? Will you agree that all future leases will specifically provide that reserved spaces will not be provided without my consent, which consent may be arbitrarily withheld?
1.04 Are you aware of any zoning or other governmental restrictions on the operation of a dental office in the demised premises?
1.05 Are you aware of any permits or other governmental approvals required for water, sewer, electric or other utilities other than those routinely required for general administrative office space?
2.01 Are you aware of any construction work, repair work, maintenance work, retrofitting, remodeling, or any other kind of work that is now in progress, that is planned or will be commenced on the HVAC, plumbing, electrical, telephone, elevator, escalator, sprinkler system, security system, or other systems in the building, any tenant spaces, the lobby or lobbies, the parking areas, walkways, stairways, or other common areas, or any other place in the building or the project during my tenancy, other than routine minor repair work? If so, give details. Are you intending to charge any of these costs as an operating expense or pass-through?
2.02 Are you aware of any defects in the building or the project such as soil movement, wood destroying organisms, water intrusion, moisture, roof, structural, HVAC, plumbing, electrical, telephone, elevator, escalator, sprinkler and fire alarm, nuisance, year 2000 problems, code compliance issues, ADA issues, or security systems and security issues?
2.03 Are you aware of any indoor air quality problems or complaints of illnesses from those working or who have worked inside the building? Are you aware of any tests that have been conducted regarding air quality in the building? What volume of fresh air is admitted into the building in conjunction with its HVAC systems? What is the age of the HVAC system? Are there plans to replace any of the equipment to comply with laws or for other reasons? If so, what is the plan and how will it be funded? How often are the filters changed? Will the HVAC system render a constant ambient temperature of 72 degrees at all times in all areas of the demised premises? Will the temperature in my entire space be controllable by my own thermostats? Will I be able to obtain or purchase “after hours” HVAC? What is the cost of “after hours” HVAC now and how will it be increased in the future?(Note: There are two sources of indoor air quality problems:
2.03.01 Microbial Contamination resulting from bacterial and fungal growth usually due to excessive moisture within the building. Usually due to improper drying during construction, faulty roofs or certain wall construction, or lack of proper cleaning and maintenance of HVAC systems.
2.03.02 Volatile Organic Compounds is contamination from fumes, often invisible and odorless associated with synthetic products in confined spaces, such as plastics, fibers, coatings, and cleaning chemicals.
2.04 Are you aware of any asbestos or other hazardous substances or conditions in or around the building? Has the building ever been surveyed to determine the presence of asbestos and hazardous substances? Will you give me a copy of the report? Is there a plan in effect to deal with asbestos in the future? If so, will you give me a copy of the plan?
2.05 Are you aware of any radon gas in the building? Has the building ever been surveyed to determine the presence of radon? Will you give me a copy of the report?
2.06 Are you aware of any non-compliance with ADA in the building and the project? Has the building been surveyed to determine ADA compliance? Will you give me a copy of the report?
2.07 What is the source of water for the building? Are you aware of any past or present water pressure or water quality problems in the building? Has the water quality serving the building been tested? If so, will you give me a copy of the report? Are you aware of any past or present sewer backups or other related water and sewer problems in the building?
2.08 Are you aware of any past or present electrical problems, low voltage, voltage spikes, or electrical interruptions in the building? Is the building on any energy conservation programs? The amperage to the electrical panel for the demised premises is ______ amps. The voltage to the electrical panel for the demised premises is ____ volts.
3. Operating Costs/Pass-Throughs
3.01 Who pays for bio-hazardous waste disposal? Are other tenants in the building serviced by bio-hazardous waste disposal companies and if so, who pays for same?
3.02 Does the building have any mercury containing lamps? If so, who pays for the disposal?3.03 Does the building comply with all state and federal ADA requirements? Are the costs of compliance to be passed on as an operating expense, and if so, how much do you anticipate the costs to be? How will new requirements be handled during the lease term?
3.04 If another tenant audits or otherwise determines that your operating costs are in error, will you promptly report the findings to us and give to us the benefit of the correction given to the tenant who discovers the error?
3.05 Are you aware of any real property tax increases, assessments, other governmental charges or other increases in costs for the building and common areas which exceed 5% for any particular such item, over the charge for the same item for the current year?
3.06 Will you limit the increase in real property taxes due to an increase stemming from the sale of the building?
3.07 Do you use the BOMA Standard Method for measuring floor area in office buildings? What is the usable square footage of the proposed demised premises? What is the rentable square footage of the proposed demised premises? What is the rentable square footage of the building? What is the “factor” used to determine the ration of usable to rentable square footage of the building? When did you last have the building measured? Will you give us a copy of the report?
3.08 The real property taxes are $_______ for the building in 200__; the real property taxes are projected to be $_________ for the building in 200__.
3.09 My pro-rata share of operating expenses for the building are ____(expressed as a decimal).3.10 The operating expenses are $_______ for the building in 200__; the operating expenses for the building in 200___ are projected to be $______ for the building in 200___.
4. Right to Expand
4.01 Will you give a right to expand to contiguous space? Will this be in the form of a right of first offer, right of first refusal or an option to expand? How will the rent be calculated? Will you give a tenant improvement allowance? Will you either (a) prorate it, or; (b) will you apportion it based on total rent to be paid during the term?
4.02 Will you give right to rent other non-contiguous space in the building? Will this be in the form of a right of first offer, right of first refusal or an option to expand? How will the rent be calculated? Will you give a tenant improvement allowance? Will you either (a) prorate it, or; (b) will you apportion it based on total rent to be paid during the term?
5. Right to Relocate
5.01 Will you grant us the right to a reasonably similar view and access? Will you pay for costs in addition to the moving of furniture, equipment and supplies? Will you pay for new stationary, et cetera?
6. Right to Purchase
6.01 Will you grant us the right to purchase the building? If so, under what terms and conditions?
7. Tenant Improvements (tax consequences)
7.01 How much will you pay for tenant improvements? At what interest rate do you amortize your cost?
7.02 What would the rent be if we paid for our own tenant improvements?
7.03 Rent holidays
8. Rules and Regulations
8.01 Will landlord agree not to promulgate any rules or regulations that could cost us money?
8.02 Will landlord agree to enforce the rules and regulations against other tenants?
9. Right to Renew
9.01 Require landlord to notify you if you missed the date for your option to renew and give you an additional 10 days in the notice.9.02 What will the renewal rent be? If rate is to be “market rent”, how will a dispute be settled? Will the “baseball” method of settlement be utilized?
10. Assignment and Subletting
10.01 Obtain right where landlord’s consent may not be unreasonably withheld.
10.02 Beware of recapture clauses.
10.03 Will interfamily and inter-partner transfers be deemed an assignment?
11. Miscellaneous Issues
11.01 Are you aware of any road construction work under way or planned for the roads serving the building?
11.02 Are you aware of any crimes that have occurred in the building or common areas? What security is presently in place? What security are you willing to agree to maintain? What are the after hours access procedures?
11.03 Is the building listed for sale or under contract for sale? Is the mortgage current? Are the real property taxes current? What is the landlord’s equity in the building?
11.04 Will your lender give a non-disturbance agreement?
11.05 Have any tenants, in the past two years, complained about condition, other than minor problems, that was not resolved to the tenant’s satisfaction?
11.06 Will you agree to enforce the rules and regulations and other tenant’s lease provisions against offending tenants if the violations affect me and my employees and patients?
11.07 Are you aware of any other condition or matter, of any nature or description, that may detrimentally affect my interest in operating a first class endodontic practice in your building?
11.08 Are you and your staff committed to assisting me in making my dental office environment a first class professional practice?
11.09 Can I obtain the right to terminate upon key person(s) death or disability?
11.10 Can I require landlord to provide janitorial specifications