Who's Responsible for Restoring Office Space to Original Condition at Lease’s End?

What Happened: The landlord and tenant performed a massive buildout to make the more than 100,000 square feet of office space leased suitable for a financial services firm with “immense computing power” and infrastructure needs. Once the 15-year lease expired, the question arose of who was responsible for restoring the space to its original condition. Citing lease language giving the landlord ownership over the improvements, the tenant asked the court for judgment declaring that it wasn’t on the hook for restoration.

Ruling: The New Jersey federal court rejected the tenant’s declaratory judgment motion and ordered a trial to be held on responsibility for restoration.  

Reasoning: The key to the tenant’s case was the following lease clause:

All alterations, installations, additions made and installed by Landlord, including without limitation [the Initial Work], shall be the property of Landlord and shall remain upon and be surrendered with the demised premises as a part thereof at the end of the Term.

But while that language did suggest the landlord was financially responsible for restoring the property, the lease contained other provisions suggesting that the language above was limited in scope and that the tenant was the owner of the alterations, installations, and additions. So, a trial would be necessary to interpret the entire lease and determine the parties’ true intentions.

• Natixis N. Am. LLC v. Cal-Harbor V Leasing Assocs., L.L.C., 2022 U.S. Dist. LEXIS 194859