Protect Yourself When Negotiating Access to Premises Clauses
By Mark Morfopoulos, Esq.
Although an owner should rightfully consider its building to be its own, once it signs a lease with a tenant, that tenant has a right to exclusive possession of its space. To ensure that an owner has access to the space after it has given up these possessory rights, the owner should add a provision covering who has what access rights to the leased space.
Access to premises provisions are common in nearly every commercial property lease, and leases typically include separate clauses for the owner's and tenant's access. Consider the following basic issues when drafting your access to premises provisions or negotiating with your prospective tenants about the terms that they are requesting.
Make Reasonable Revisions to Broad Clause
Be prepared for a tenant to ask for access to its space (and other space in the building) during nonstand-ard hours. The tenant may claim that its business operations require such access, or that it needs the access to do its own alterations or complete work in the space as quickly as possible. A tenant may ask for a broad premises access lease clause, allowing it to have constant access, stating: “Tenant may have access to the Premises twenty-four (24) hours a day, seven (7) days a week, three hundred sixty-five (365) days a year.”
You can make several revisions to modify a tenant's broad premises access clause to make it more reasonable from your perspective, but still allow the tenant to operate effectively. For example, a tenant's access rights should always be subject to your building-wide security requirements during nonstandard business hours.
Practical Pointer: Include a provision in the lease prohibiting the tenant from accessing its space in the event of building emergencies. It could interfere with your emergency efforts or those of the fire department and other public safety officials and first responders.
Grant Reasonable Specific Access Requests
Even if a tenant has successfully negotiated with you for fairly broad access to the property, it may want additional provisions in the lease giving it access to the building before the lease term commences to perform due diligence or construction work. Or it may need to have access to the building's mechanical or electrical rooms if it is performing certain alterations in its space.
The following mechanical and electrical room access clause is an example of a reasonable provision that you may want to agree to if it doesn't pose a problem for you. Note that it requires your approval for alterations and provides reimbursement to you for any charges resulting from the tenant's access. Show this language to your attorney before adding it to your lease clause:
Model Language
Owner agrees to provide Tenant with access to the mechanical and electrical rooms located within the Building to enable Tenant to perform such alterations that Owner approves. In addition, Tenant shall reimburse Owner as additional rent for any reasonable costs and expenses incurred by Owner in providing the access described in this clause within thirty (30) days after receipt of Owner's statement setting forth such costs and expenses in reasonable detail.
Draft Broad Owner Access Rights
As the owner, you should be concerned with maintaining the security of your building and reserving your own right to access a tenant's space to perform alterations for that particular tenant or for the benefit of the entire building, and to provide and maintain building-wide services, such as repairs. Give yourself enough leeway to effectively run your property, with this owner's access clause that you can adapt and add to your lease if your tenant agrees to it. Ask your attorney before using it.
Model Language
Tenant shall permit Owner, Owner's agents, and public utilities servicing the Building to erect, use, and maintain ducts, pipes, and conduits in and through the Premises. Owner or Owner's agents shall have the right to enter the Premises at all reasonable times: (i) to examine the Premises; (ii) to show it to prospective purchasers, mortgagees, or lessees of the Building or space therein; (iii) to make such decorations, repairs, alterations, improvements, or additions as Owner may deem necessary to the Premises or to any other portion of the Building or which Owner may elect to perform following Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this Lease; or (iv) for the purpose of complying with laws, regulations, or other requirements of government authorities. Owner shall be allowed to take all necessary material and equipment into and upon the premises and to store them within the Premises without the same constituting an eviction or constructive eviction of Tenant in whole or in part and the Rent shall not abate while any decorations, repairs, alterations, improvements, or additions are being made by reason of loss or interruption of Tenant's business.
Additionally, you may want to include specific access clauses in your lease. For example, you could include an access at end of lease term clause, pertaining to your right of access during the last six to 12 months of a tenant's term so that you can make efforts to rent the space.
Model Language
If, during the last twelve (12) months of the Term, Tenant shall have removed all or substantially all of its property from the Premises, Owner may immediately enter and alter, renovate, and redecorate the Premises, without elimination or abatement of Rent, or incurring liability to Tenant for any compensation, and such acts shall not be deemed an actual or constructive eviction and shall have no effect upon this Lease.
An owner may also be concerned that the tenant may not be available to permit access to its premises at the time it needs immediate entry. Here is language that will ensure your right to access in such a situation:
Model Language
If Tenant shall not be personally present to open and permit an entry into the Premises, at any time, when for any reason an entry therein shall be necessary or permissible, Owner or Owner's agents may enter the Premises with a master key, or may forcibly enter the Premises, without rendering Owner or its agents liable therefore (if during such entry Owner or its agents shall accord reasonable care to Tenant's property), and without in any manner affecting the obligations and covenants of this Lease.
Consider Tenant's Objections
There are a number of issues that a tenant may have with a broad owner's access clause like our Model Language above. Be prepared to negotiate these terms so that they are fair from the tenant's perspective.
First, allowing an owner to place anything “in and through” a tenant's premises leaves open the possibility that such items may be visible to the tenant or interfere with its operations. Your tenant may require that you place all ducts, pipes, and other conduits in a concealed manner behind the walls and above the ceiling of its space.
Second, except in emergencies, it is not unreasonable for a tenant to request that it be given advance notice before any third parties enter into the premises. This is critical for many tenants and not difficult for owners to implement, making it a good concession during negotiations.
Third, our owner's access clause gives the owner the right to enter a tenant's premises to perform work that a tenant is obligated to perform without giving the tenant a chance to make the repair. Many tenants ask for provisions that allow an owner to make repairs only if the tenant does not perform the work itself within applicable notice and grace periods.
Fourth, our owner's access clause permits the owner to store its materials within the premises without limitation. Be aware that most tenants will attempt to negotiate this as a temporary right and that in no event should the period be in excess of a certain number of consecutive business days.
Fifth, our owner's access clause ignores the fact that the tenant has a business to run at the premises. A tenant will want to prevent you from materially impairing or reducing access to its premises or causing disruption to its business when the disruption can be avoided.
To minimize the impact to its business caused by your access, a tenant might suggest a minimizing business operations clause that protects its business if your access to the space causes damage to it.
Model Language
Owner shall take such measures as may be reasonable during the performance of any decorations, repairs, alterations, improvements, or additions so as to minimize interference with the conduct of Tenant's business, including, without limitation, using overtime labor to perform any decorations, repairs, alterations, improvements or additions. In addition, none of the foregoing rights by Owner shall result in Tenant's access to the Premises being materially impaired or reduced.
Many owners can and do resist agreeing to use overtime labor to perform work. Because of that, a tenant's success in including a minimizing business operations clause will be a function of its relative bargaining strength with the owner. Depending on what type of tenant you are renting to, you may have to agree to such a clause. And if your tenant is successful in requiring you to minimize disruption, it may also insist that rent will abate if its business operations are materially affected for more than a certain number of days.
Be aware that minimizing business operations clauses are a highly negotiated provision and that your tenant most likely will suggest one. During negotiations, remember that the tenant's ability to pay rent is based in large part on its ability to run its business. If it can't operate its business because of your interference, it won't be able to pay you rent.
Of course, there are many variations to every one of these clauses. But they should remind you that drafting access provisions is not as easy as simply stating that the tenant and the owner have a right of access to the space. Being aware of access issues can be critically important and can make the difference between making a deal and getting a deal done right.
Mark Morfopoulos, Esq., is a real estate attorney in Hartsdale, N.Y., and a member of the Insider's Board of Advisors. He can be reached at Mmorf923@aol.com.
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