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Environmental Provision of a Commercial Lease

By Howard C. Stross
October 01, 2014

Whether commercial real estate space is industrial, retail or office use, and whether you are landlord or tenant, the environmental provision of a commercial lease is a subject both landlord and tenant must understand concerning each party’s responsibilities, benefits and liabilities. Landlord aims to protect itself from actions by governmental authorities when tenant is responsible for the HVAC system or manufactures a product using a hazardous substance. Landlord will want a clause requiring tenant and tenant’s contractors to comply with Florida and federal laws and to indemnify and hold landlord harmless if there is governmental action. The lease may also require tenant to carry minimum limits of environmental insurance coverage with a maximum deductible. The strength of this protection is only as good as the tenant’s financial abilities, or if tenant has environmental insurance, to the extent the policy has coverage. Landlord will always be ultimately liable.

The subject of air quality, particularly where people spend much of their work time confined in an office or other enclosed space, includes the potential for liability to landlord or tenant or both if persons incur health issues resulting from the air quality or lack thereof. For protecting both landlord and tenant, HVAC equipment and ducts should be inspected and issues corrected before tenant’s occupancy to avoid liability issues related to air quality. The cost of inspections and remedial work can be and typically is pricey. Landlord and tenant will want to spell out who will do the inspection and any remedial work, the details of the required work, who is the responsible party to see the work is done and its cost is promptly paid before tenant takes possession. A distant second option would be to require tenant to accept HVAC as is using landlord disclaimer language and a statement in the lease that tenant has inspected or has had the opportunity to inspect HVAC before being bound by the lease. If HVAC discrepancies were corrected before tenant takes possession, tenant should have the right to re-inspect before taking possession, and after tenant’s inspector approves the maintenance and cleaning performed at the direction of landlord, tenant must take possession and open for business.

This article is for general information only and is not intended to provide legal advice. The environmental provision is only one of the important elements that must be considered and addressed in your commercial lease agreement. If you have questions or concerns about your commercial lease, please call us at 813-852-6500 for a free 30-minute consultation with a commercial real estate attorney.

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