Get Right to Revise List of Approved Contractors and Subcontractors

Your lease may give you the right to approve a tenant's proposed general contractor and subcontractors before the tenant can begin alterations to its space. Savvy tenants today often demand that you agree to attach a list of preapproved general contractors and subcontractors to the lease who are deemed to be acceptable to perform the tenant's initial work to the space. This way, the tenant won't have to worry that its initial work will be delayed because of delays in getting your approval. And it won't have to scramble to find a replacement contractor if you turn down its first choice.

But some tenants take this demand for a preapproved list one step further: They also want you to deem the listed general contractors and subcontractors approved for any future alterations, not for just the initial work. Although agreeing that the listed contractors are deemed approved for the tenant's initial work is okay, agreeing that they'll be deemed approved for future alterations can lead to trouble, warns New York City attorney Jacob Bart. You may have a bad experience with a contractor on the list and no longer want tenants to use it, or a contractor may have gone out of business. And better choices of contractors may come along, he says.

Ideally, you'll want to say no to this demand. But if you must agree to it, make sure you get the right to revise the list after the tenant completes its initial work, advises Bart. Then you'll be able to strike off bad contractors or those no longer in business and add good ones. Start off with a hardball approach—to get as much control over revising the list as possible, he says. If the tenant balks at that approach, you can propose a compromise approach.

Hardball Approach: Revise List as You Deem Appropriate

Say in the lease that you've got the right to revise the list of preapproved general contractors and subcontractors whenever you want and “as you deem appropriate” after the tenant finishes its initial work, says Bart. This way, you can delete or add as many general contractors or subcontractors as you want, whenever you want.

Model Lease Language

Following completion of Tenant's Initial Work, Landlord shall have the right, at any time and from time to time, to revise the list of approved general contractors and subcontractors for each of the major trades (which list is attached hereto as Exhibit [insert #]), as Landlord deems appropriate.

Compromise Approach: Set Time and Choices

A savvy tenant may balk at the hardball approach because it sets no limits on when you can revise the list, says Bart. You could, for instance, remove a contractor from the list just as the tenant is about to start alterations with that contractor. And the tenant may worry that you could undermine the usefulness of the list by leaving only one—or no—general contractor and subcontractor on it, he adds.

To soothe the tenant, try this compromise approach instead, says Bart: Say that you may revise the list within a certain number of days of getting the tenant's notice that it intends to do additional alterations. Also, agree that you'll maintain a minimum number of general contractors and subcontractors on the list for the tenant to choose from, he adds. And promise that each contractor you list will be “qualified, reputable, and independent,” so that the tenant can expect a job done properly at a reasonable price. CLLI0107

Model Lease Language

After completion of Tenant's Initial Work and within [insert #] days of Landlord's receipt of written notice from Tenant indicating Tenant's intention to perform additional Alterations at the Premises, Landlord may revise its list of approved general contractors and subcontractors for each of the major trades (which list is attached hereto as Exhibit [insert #]), as Landlord deems appropriate; provided, however, that Landlord shall maintain a list of not fewer than [insert #, e.g., 5] approved, qualified, reputable, and independent general contractors and [insert #, e.g., 3] approved, qualified, reputable, and independent subcontractors for each major trade.

CLLI Source

Jacob Bart, Esq.: Member, Stroock & Stroock & Lavan LLP, 180 Maiden Ln., New York, NY 10038-4982; (212) 806-5400; jbart@stroock.com.