In the Spotlight: Issues with HVAC

Disputes over specialized tenant improvements or exclusive heating and air conditioning systems are common in commercial leasing. Landlords and tenants often argue over maintenance and repair obligations, or whether or not such specialized tenant improvements can remain on the premises upon the expiration of the term or if the tenant is obligated to remove the alterations at the tenant's sole cost. Landlords often require such alterations be removed and the premises restored to their original condition while tenants would obviously prefer not to have to incur such large move-out expenses. With respect to exclusive heating and air conditioning systems (HVAC), typically the argument between landlords and tenants is whether or not the tenant must incur significant expenses maintaining and/or replacing a defective unit toward the end of the term at its sole cost for the benefit of the subsequent tenant of the premises. This article discusses the typical approaches to these issues, and offers suggested compromise language for office and retail commercial leases.