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LEASE AGREEMENT REFERENCE GUIDE: LARG 1000 STRATEGIES FOR WORK LETTERS AND THE ADA $49.95


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Lease Strategies
1000

Product Overview

This LARG contains the following items:

Allocating ADA Construction Obligations in New Leases, Excerpts From the Pro-Tenant ADA Turn-Key Work Letter Rider, and the Lease Clause Critique: Selections From the Pro-Landlord ADA Work Letter.

Number of Single Spaced Pages: 12

 

Excerpt

STRATEGIES FOR WORK LETTERS AND THE ADA

This LARG focuses upon how the Americans With Disabilities Act of 1990 has affected the work letter in commercial leases. The first section looks at how landlords and tenants might contractually allocate responsibility for compliance with the ADA in the lease. The second part looks at excerpts from a pro-tenant work letter rider with several provisions relating to the ADA. Finally, the Lease Clause Critique features numerous clauses from a pro-landlord work letter. These provisions specifically allocate compliance obligations relating to the leasehold improvements under the ADA between the landlord and the tenant.

Allocating ADA Construction Obligations in New Leases

Most commercial landlords and tenants know that Title III of the Americans With Disabilities Act (ADA) requires that buildings and premises open to the public be made accessible to persons with disabilities. The ADA, passed on July 26, 1990, mandated that the persons or entities managing, owning or leasing such facilities remove all architectural barriers which interfere with the ability of persons with mobility impairments to enter such facilities and move freely throughout them. These modifications were to be completed on or before January 26, 1992.

By now most commercial landlords, tenants, and property management firms responsible for public facilities in America subject to the ADA have retrofitted them to comply with the act. And, of course, in addition to accessibility modifications required by Title III of the act, both commercial landlords and tenants must comply with the other non-discrimination protections that the ADA affords to disabled Americans (e.g., prohibitions barring discrimination against persons with disabilities through eligibility criteria which screens them out, or treats them differently than people without disabilities, etc.).

Leases In Effect Prior to Passage

For leases in effect prior to the passage of the ADA, the responsibility of the landlord and the tenant to comply with newly enacted laws and regulations, such as the ADA, and to pay for the costs of such compliance may or may not have been adequately covered in the paperwork. Many commercial leases contained language which purported to allocate responsibility between the parties for new legislation such as the ADA.

For example:

  • Many leases contain a Compliance With Law clause which obligates the tenant to comply with new laws or regulations pertaining to the tenant's specific use of the premises. In some cases, the tenant is responsible to comply with all laws and regulations which affect the premises, whether or not they pertain to the tenant's specific use.
  • Almost all commercial leases contain an Operating Cost Reimbursement Clause (or common area maintenance clause) which customarily provides that the tenant is responsible for its proportionate share of costs to maintain, manage or operate the property. If such provisions are broadly drafted, they usually make the cost of all items needed to comply with laws or regulations affecting the property reimbursable, such as the cost of ADA modifications to the common areas of the property. By contrast, such operating cost provisions would normally exclude compliance costs relating to individual premises in the building or project, which would be the responsibility of the tenant. In addition, operating cost provisions often contain limitations upon the amount of so-called "capital" costs that can be passed through to the tenants; ADA modifications may be capital items depending upon the lease's definition of that term. Capital expenditures are items with lasting value which must be amortized over their useful life, rather than expensed in the year incurred.
  • Most commercial leases have detailed provisions relating to Alterations to the Premises and Repair Responsibility for the Premises. Frequently, such clauses also contain language defining the responsibility of the parties with respect to compliance with laws and regulations affecting the premises. For example, a pro-landlord lease form might contain an alterations clause which requires the tenant to perform all alterations to the premises mandated by legislation enacted after the commencement of the term.

Leases Signed After Passage of the ADA

For leases negotiated after the effective date of the ADA, the landlord and the tenant are free to allocate their responsibilities under the ADA via language in the lease. For example, the lease (or its work letter) may provide that the landlord is responsible for ADA construction compliance in all public or common areas of the building, and that the tenant is obliged to comply with all ADA accessibility requirements for the premises. This approach makes a certain amount of sense because the landlord is in control of the common areas of the building, and the tenant is in control of its premises.

Such a contractual allocation between the parties won't release the landlord from responsibility for accessibility modifications in the tenant's premises if an ADA enforcement action is ultimately brought by the Justice Department against both the landlord and the tenant. This is the case even though, in our example, the lease provides that the tenant is responsible for ADA compliance in the premises. Since the ADA provides that anyone involved in the operation of public facilities covered by the ADA is subject to act, a lease clause making one party exclusively responsible for compliance will have no effect upon enforcement actions by the government.

The best the landlord could do if an enforcement action is commenced concerning the premises (for which the tenant is responsible) is sue the tenant for breach of its covenant in the lease, rely upon any indemnities contained in the lease which run in favor of the landlord for compliance, or seek to force the tenant to perform the covenant through some sort of mandatory injunction.

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