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The RENT blog gives you the resources and tools you need to make the best decisions regarding your real estate needs.  We cover a broad range of subjects regarding office space, tenant needs and what to look for when investing in property.

MINIMIZE YOUR RISK: KNOW YOUR BUSINESS INTERRUPTION CRE LEASE CLAUSE, businesss interuptio clause

MINIMIZE YOUR RISK: KNOW YOUR BUSINESS INTERRUPTION CRE LEASE CLAUSE

Businesses must protect themselves from risks that can bring operations to a halt.  Inoperable or faulty building equipment may terminate essential building services.  As the frequency of extreme weather increases, so does the risk of property damage which can hinder business operating (flooding, loss of power, HVAC).

Most “standard” office lease proposals presented by the landlord state that if essential building services (electricity, HVAC, etc.) are interrupted, the rent payments continue as normal.  Tenants should contest this arrangement, as the building’s services are a fundamental part of the lease and the landlord should shoulder, or at least share, the risk of service interruption.

Tenants should advance a provision in their lease which provides relief in the case of service disruption lasting more than 3 to 5 days and cancellation of the lease if the interruption lasts more than 60 to 180 days.  The relief can come in the form of rent abatement.  Most landlords will accept such modifications to the lease if the new clauses give the landlord a reasonable amount of time to restore essential services.  But if the tenant neglects to raise this issue in the negotiation, the tenant is unlikely to receive relief for prolonged service disruption. Remember, abatement of rent and lease termination for prolonged service interruption are fairly common and generally acceptable practices.

However, as with all aspects of lease negotiations, the negotiation of the interruption of services provision is subject to:

 

  • The relative bargaining power of the tenant and landlord
  • Prevailing market standards
  • Lender requirements
  • Availability of insurance

 

IMPORTANT:

Tenants with mission critical operational or communication requirements should negotiate the right to install a generator on the property so that the tenant can continue critical operations until services are restored.

Businesses should retain an experienced tenant representative broker to minimize the financial and operational risks in their office lease.

At Golden Group Real Estate, we specialize in tenant representation for office users in the Chicago area, helping local business owners find office space and negotiate lease and purchase agreements. We never represent landlords, so we are prepared to negotiate aggressively on behalf of our tenant clients.

For more on Golden Group Real Estate, read about our real estate services.  Let us know if we can help you find office space for rent or buildings for sale.  Call us at (630) 805-2463, email us at troy@goldengroupcre.com, or enter your office space search criteria below.

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