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Commercial Real Estate Investment/Is Central Air Unit replacement Landlord responsiblity

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Expert: - 7/30/2008


Question
Hello. We have the basic commercial lease in Massachussetts. Our AC unit was not working at maximum. So our landlord said it was our reponsibilities for repairs and  maintenance of it. He also told us that it was his reponsibilty to change a heating unit which he had done this past winter. Would this apply to the Central Cooling system which is on the outside of our restaurant. The repair man said it is broken and cannot be fixed and only can be replace with  a new unit. Please advise.

Answer
Michelle-

Your lease should address this matter with some level of specifics as to who is responsible for purchasing the new unit.  Did you know, or were you told, by your landlord that the A/C unit was old and about to wear out?   Was it the first season since you signed your lease that you realized that the AC unit was worn out and could not handle the heat load?

Ask your repairman if the capacity of the a/c unit (usually expressed in BTU's or Tonnage) installed was sufficient to cool your restaurant when fully operational in warm weather.  Perhaps the unit was undersized originally or the unit was intended for the tenant leasing the same premises before you moved in and they only sold books and didn't need as big a unit.  

You can have your a/c unit repairman tell you the year that the broken unit was manufactured - he should be able to make that determination from some information that is attached to the unit.  You will know then how many years that the unit has been in service.

Depending upon the age of the unit, a very powerful argument may be made regarding the reasonableness of asking a tenant to pay for a new unit that has a generally agreed to life expectancy of 5 or 10 years, when the old unit was 15 years old!  It might be considered that the landlord "failed to reveal a material fact" when the reasonable "useful life" of the worn out unit was X years, and the unit now has been in service for X plus 5 more years.

This is the way that MANY landlords commonly use to have tenants buy them new heating and cooling equipment; by leasing worn out equipment to their tenants and making them responsible for replacing it.  Tenants should always have a repairman check out the equipment BEFORE they sign their lease to make a determination of the chances they will be forced to buy new equipment over the extended term of their lease.   

I'd like to know how this situation turns out.

Good luck.

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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