In your house you know it as the furnace and A/C Unit but in your commercial space it is the HVAC system. Your space may have a rooftop unit, or a heat pump; or maybe the equipment uses fan coils or blower coils to heat the space. No matter what HVAC system is in place, it is important there is a clear understanding of who is responsible for the repair and maintenance of this very expensive and important equipment!
Most commercial leases will pass any cost associated with the maintenance, repair AND replacement of the HVAC system on to the Tenant. That may not always be fair! What if you as the Tenant are taking over on old space with damaged equipment that was never properly maintained by the previous tenants? Or what if you share a unit with another Tenant whose hours are longer and therefore uses the equipment more?
When looking at a space it is important to understand what type of system your business will need and that is when having the right team of experts from the beginning (BEFORE you sign an Offer) is so important.
And remember generally speaking, the equipment is affixed to the property and therefore is the property of the Landlord. You will not have any benefit from the cost of upgrading the HVAC system once you vacate the space.
In most instances the COST of the HVAC’s maintenance is allocated to the Tenant, but you will need to read the Lease carefully to understand who is actually responsible to engage an HVAC technician. Some Landlords will engage the contractors and usually there would be an Admin fee associated with that (typically 15%). Often times if the Landlord allows the Tenant to engage their own contractor, they will need to seek the Landlord’s approval first. If it is your responsibility as the Tenant to ensure proper maintenance of the HVAC systems it is important to use a licenced company and keep a copy of the maintenance contract and inspection logs.
So what do you want to think about when you are discussing the HVAC clause…
- What is the condition of the unit?
- What type of equipment does my business need?
- Is the unit being shared with others? Either Tenants or Common Areas
- Who is responsible for the performance and who bears the cost?
- Will the replacement cost be amortized over its useful life?
- Is this cost included in the figures quoted by the Landlord or is it going to be an additional cost?