Your recently purchased commercial building is ready for tenants, and the applications are trickling in. While you’re excited to fill the space, you have some reservations about renting. You’re new to this game, and you aren’t sure what your liabilities are.
One of your biggest fears is that something in the building will break down. Maybe the electrical system isn’t brand new, or the HVAC system has a history of causing issues. Whose job will it be to make repairs and replace broken equipment?
Your lease should outline the responsibility of both the tenant and you, the property owner. Some commercial leases are “triple net,” especially if a single tenant takes the whole property. In that case the tenant pays for substantially all repairs. In other situations commercial leases generally have a division of duties.
The tenant is usually responsible for things that could wear down or break due to regular use. If the flooring or wallpaper deteriorate, the tenant should replace them with the same quality product. Lighting issues, when they do not involve electrical wiring, are also the tenant’s responsibility. The tenant should also replace broken fixtures such as those in bathrooms and kitchens that are within the tenant’s demised space.
The landlord is often responsible for anything structural unless an issue is caused by the tenant’s negligence. This would include the foundation, walls and roof of the building. The landlord is also usually responsible for the electrical, heating and ventilation systems. Meeting building, fire and safety codes is generally up to the landlord.
Property owners usually prefer to control major repairs because substantial money and risk can be involved. It is not illegal for a landlord to allow a tenant to work on structural issues, but you should use your best judgement. A tenant may think they have what it takes to do extensive repairs, but they may not want to spend the amount needed for quality work, and some things require training and experience.
It is ultimately up to you as the landlord to propose a lease that fully outlines the division of repair, maintenance and replacement responsibilities in various situations.
Your lease should protect you in the event of a tenant’s negligence that causes damages and should specify what happens in the event of a major disaster such as flood, storm or fire. Insurance requirements should be clearly specified. You can dictate the deadline by which repairs must be complete.