In 2015, Service Champions, a
national HVAC installation company estimated that the average cost of an HVAC system
ranges from $6,000 to $12,000. Now imagine you are a franchisee, or a small
business owner leasing commercial space when the pre-existing HVAC system
breaks down. Your first thought might be that the landlord is responsible. However, if your lease is not carefully drafted
then it might be your responsible for that big replacement bill.
How can a tenant leasing commercial space
avoid the crippling costs of an HVAC repair or replacement? It’s almost certain
to happen at some point during the average commercial lease. According to
Dominion Service Company, the average life of a commercial HVAC system is 15
years, but when the HVAC system is being used in a restaurant, the life
expectancy is significantly shorter, as the system must work harder to cool the
heated kitchen or back of the house space. However, exactly can a tenant avoid,
or limit these costs? An experienced commercial leasing attorney can insert the
proper HVAC clause into the lease. When drafted appropriately, an HVAC lease
provision can limit the tenant’s cost when the HVAC unit is used, or in need of
replacement or repair, or eliminate tenant liability for the cost altogether.
The tenant’s exposure mostly relies upon the willingness of both the landlord
and the tenant to agree on the exact verbiage of the clause.
Before any landlords get upset and
stop reading this article, the provision can also be used to benefit both the
tenant and the landlord. While an HVAC provision can limit the tenant’s
exposure to a potential repair or replacement of the HVAC unit, it can also lay
out specific details as to how the cost of the repair or replacement will be
carried out so that the landlord is not obligated to the entire cost. Another
benefit to landlords is a provision that has language about the tenant’s misuse
of the system or their failure to properly maintain the system, which would
result in the landlord not being liable for any of the expenses in those
specific situations. Such measures, such as requiring scheduled maintenance in
the lease can extend the life of an HVAC system, and keep the overall costs to
the tenant and landlord to a minimum.
Whether you are a landlord or a
tenant, consulting an attorney with commercial leasing experience prior to entering
into a commercial lease can save you time, money and trouble. HVAC units fail
and need repairing far more often than we estimate and whether you are a small
business or a large business, $6,000 to $12,000 would hurt anyone’s operating
budget. Be sure to consult an experienced
commercial leasing attorney to minimize exposure to such a repair or
replacement costs.
Written By: Tayler M. Hudson, Summer Associate at the Marzella Law Group, PLLC and Rising 3L at North Carolina Central University School of Law.
Written By: Tayler M. Hudson, Summer Associate at the Marzella Law Group, PLLC and Rising 3L at North Carolina Central University School of Law.