Presenting a live 90-minute webinar with interactive Q&A Commercial Leases: Avoiding Costly Mistakes in Drafting Build-Out, Repair, Casualty and Insurance Provisions THURS DAY, NOVEMBER 14, 2013 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Barry Katz, Partner, Arnstein & Lehr , Chicago Iryna Lomaga Carey, Partner, Kurzman Eisenberg Corbin & Lever , White Plains, N.Y . The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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COMMERCIAL LEASES: AVOIDING COSTLY MISTAKES IN DRAFTING BUILD-OUT, REPAIR, CASUALTY AND INSURANCE PROVISIONS Strafford CLE Webinar Thursday, November 14, 2013 1:00 pm – 2:30 pm (EST) Barry R. Katz, Esq. Iryna Lomaga Carey, Esq. Partner Partner Arnstein & Lehr LLP Kurzman Eisenberg Corbin & Lever, LLP 120 South Riverside Plaza, Suite 1200 One North Broadway, 10th Floor Chicago, IL 60606-3910 White Plains, NY 10601 brkatz@arnstein.com icarey@kelaw.com Direct Dial: 312.876.7847 Direct Dial: 914.286.6372 5
THRESHOLD ISSUE: WHICH PARTY IS RESPONSIBLE FOR THE BUILD OUT? • Who is re spo nsib le , L a ndlo rd o r T e na nt? • Do e s o the r pa rty ha ve a ppro va l o ve r hiring o f c o ntra c to r? • Wha t is the Co st o f Wo rk? • Ho w is it pa id? • Who o b ta ins pe rmits? 6
PRE-COMMENCEMENT BUILD-OUT CONSIDERATIONS T e na nt c o nside ra tio ns • T iming fo r c o mple tio n Wha t ha ppe ns if time line no t me t? I f L a ndlo rd pe rfo rms the Wo rk, do e s T e na nt ha ve a dro p de a d da te to te rmina te o r is pa yme nt o f re nt tie d to c o mple tio n da te o r b o th? • Co nditio n o f de live ry • Co st o f c o mple tio n • T e na nt’ s ro le in c o nstruc tio n pro c e ss • Pla n re vie w pro c e ss • Pe na ltie s fo r la te de live ry 7
PRE-COMMENCEMENT BUILD-OUT CONSIDERATIONS L a ndlo rd c o nside ra tio ns • Bidding pro c e ss • De fining “sub sta ntia l c o mple tio n” • Co mplia nc e with la ws • Disruptio n o f o the r te na nts • Ove rtime • Co o rdina ting la ndlo rd’ s wo rk a nd te na nt’ s wo rk 8
APPROVAL OF PLANS • Who pa ys fo r pla ns? • Bo th pa rtie s will ha ve input a nd rig hts o f a ppro va l • T ime fra me fo r c o mme nts • T he la rg e r the Pro je c t, the mo re like ly T e na nt will wa nt c o mpe titive b ids 9
Change Orders • Ne g o tia te thre sho ld a mo unt • De ta il pro c e ss • Ho w muc h no tic e ? • Whe n is pa yme nt re q uire d fro m T e na nt if c o st o f c ha ng e o rde r inc re a se s c o st o f c o nstruc tio n? 10
Cooperation Of Parties • F o r la rg e r pro je c ts c o nside r re g ula rly sc he dule d pro je c t me e ting s a nd pro g re ss re po rts • Co o rdina tio n o f L a ndlo rd a nd T e na nt Wo rk • T e na nt c a nno t inte rfe re with L a ndlo rd’ s c o ntra c to rs • Pa rtie s ne e d to wo rk in ha rmo ny • I nsura nc e issue s 11
Punch Lists • Ho w fa r in a dva nc e to re q uire ? • Who g e ts to pa rtic ipa te in c o mple tio n o f punc h list? • Wha t is c o nside re d sub sta ntia l c o mple tio n? • Ho w lo ng do e s L a ndlo rd g e t to c o rre c t punc h list ite ms? • Ho w a re dispute s re so lve d? • Pa rtie s sho uld sig n the fina l punc h list 12
Delivery Of Premises • Pre mise s to b e de live re d in g o o d c o nditio n • HVAC syste m, plumb ing , e le c tric a l, me c ha nic a l syste ms • De live ry in c o mplia nc e with b uilding c o de s a nd pla ns 13
Representations And Warranties • Afte r c o mple tio n o f Wo rk, do e s L a ndlo rd o r c o ntra c to r pro vide re pre se nta tio ns a nd wa rra ntie s? Ro o f a nd struc ture HVAC, plumb ing a nd a ll o the r syste ms E le c tric a l c a pa c ity • Ho w lo ng do wa rra ntie s a nd o c c upa nc y re pre se nta tio ns survive ? (1-2 ye a rs) • L a te nt de fe c t e xc lusio n • Ho w muc h time do e s T e na nt ha ve to de live r no tic e o f a pro b le m to L a ndlo rd? 14
SAMPLE CONSTRUCTION PROVISIONS So m e b a sic c la u se s fo r d isc u ssio n … . 15
LANDLORD’S WORK • L a ndlo rd sha ll, a t L a ndlo rd’ s so le c o st a nd e xpe nse (e xc e pt a s o the rwise pro vide d he re in), furnish a ll o f the de sig n, ma te ria l, la b o r a nd e q uipme nt re q uire d to c o nstruc t the mpro ve me nts 1 in a c c o rda nc e with the Pla ns a nd Spe c ific a tio ns (the “Pla ns”) a s mo difie d I b y a ny Cha ng e Orde r. L a ndlo rd sha ll c o nstruc t the I mpro ve me nts in a g o o d a nd wo rkma nlike ma nne r, a nd in a c c o rda nc e with a ll a pplic a ble sta tute s, o rdina nc e s a nd b uilding c o de s, g o ve rnme nta l rule s, re g ula tio ns a nd o rde rs re la ting to c o nstruc tio n o f the I mpro ve me nts (b ut no t ma tte rs a rising b e c a use o f T e na nt Wo rk o r spe c ific to the pa rtic ula r b usine ss T e na nt se e ks to e ng a g e in the Pre mise s). L a ndlo rd sha ll dilig e ntly pro c e e d with the c o nstruc tio n o f the I mpro ve me nts a nd use re a so na b le spe e d, dilig e nc e a nd g o o d fa ith e ffo rts to Sub sta ntia lly Co mple te the I mpro ve me nts to the Pre mise s o n o r prio r to the Pro je c te d Sub sta ntia l Co mple tio n Da te ; pro vide d, ho we ve r, if L a ndlo rd fa ils to so Sub sta ntia lly Co mple te the I mpro ve me nts a nd de live r po sse ssio n o f the Pre mise s o n o r prio r to the Pro je c te d Sub sta ntia l Co mple tio n Da te , the n (a ) the va lidity o f this L e a se a nd the o b lig a tio ns o f T e na nt unde r this L e a se sha ll no t b e a ffe c te d, a nd e xc e pt a s se t fo rth he re in, T e na nt sha ll ha ve no c la im a g a inst L a ndlo rd (a nd L a ndlo rd sha ll ha ve no lia b ility) he re unde r, a t la w o r in e q uity, a rising fro m L a ndlo rd’ s fa ilure to Sub sta ntia lly Co mple te the I mpro ve me nts a nd de live r po sse ssio n o f the Pre mise s b y suc h da te ; a nd (b ) sub je c t to the pro visio ns he re o f, the Co mme nc e me nt Da te sha ll b e po stpo ne d to the e xte nt o f suc h de la ys. 1. Capitalize d te rms no t de fine d in the sample c lause s are de fine d e lse whe re in the do c ume nt fro m whic h the sample c lause s have b e e n take n, and will ne e d to b e de fine d as appro priate fo r the de al at issue . 16
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