USA – NEW YORK Law and Practice Contributed by: Lindsey E. Haubenreich, Joseph P. Heins, Timothy P. Moriarty and Kimberly R. Nason, Phillips Lytle LLP
6.9 Payment of Maintenance and Repair Landlords are typically responsible for pay - ing for the maintenance and repair of common areas used by several tenants, such as lobbies, elevators, parking lots and gardens. However, tenants are often responsible for reimbursing the landlord for their pro rata share of operat - ing expenses. Sometimes reimbursement com - mences from the first dollar and sometimes over a base amount, depending on negotiations and the structure of the lease. Ground leases are triple net leases whereby the tenant covers all expenses for maintenance and repair obligations of the leased properties. 6.10 Payment of Utilities and Telecommunications Telecommunications and utilities are typically paid for by the tenants. Each tenant’s space is either metered or submetered for electricity, or the tenant reimburses the landlord for electric costs pursuant to a formula. The charges for heating, ventilation and air con - ditioning (HVAC) depend on how the property is engineered. Each tenant may have its own cooling system, or the tenants may be served by a building-wide cooling system during busi - ness hours and subject to significant charges for after-hours HVAC. Tenants may also control sup - plemental HVAC systems to provide overnight cooling, typically for IT and telecom installations. 6.11 Payment of Property Taxes Other than under a gross lease or if the parties otherwise agree, a tenant is typically responsi - ble for its share of real estate taxes or its share of increases in real estate taxes. When a tenant is the sole occupant of a property (eg, under a ground lease), the tenant will pay 100% of the real estate taxes, assuming its parcel is sepa -
rately assessed, and will likely be required to pay those taxes directly to the municipality. 6.12 Insurance Issues The landlord and tenant each have to insure their respective interests in the real estate, subject to the terms negotiated and included in the lease. Negotiated issues include whether rent abates because the space becomes unusable, for example, due to a casualty, pandemic or other force majeure, and who is required to maintain business interruption insurance. 6.13 Restrictions on the Use of Real Estate A landlord can impose restrictions on a tenant’s use of the real estate via the permitted use pro - vision, which typically lists specific permissible and prohibited uses of the space, and allows the landlord to declare a default and exercise available remedies if the tenant engages in an unpermitted use. The tenant’s use can also be restricted by local zoning laws, as well as build - ing and health regulations. Retail leases often also grant exclusive uses to tenants, which are limited to the tenant’s specific product line and/ or other competitors. 6.14 Tenant’s Ability to Alter and Improve Real Estate Tenants are typically permitted to alter or improve the real estate during the lease with the landlord’s approval, and landlords generally allow merely cosmetic alterations without prior approval. A lease usually contains a limit on the cost and type of alterations a tenant can make
without the landlord’s approval. 6.15 Specific Regulations Commercial Leases
Commercial leases are generally governed by the agreement between the parties. However,
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