Health Law Advisor

In our ongoing series of blog posts, we examined key negotiating points for tenants in triple net health care leases. We also offered suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions, when implemented, are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, maintenance and repair obligations, and holdover provisions. This latest blog post focuses on negotiating surrender terms. Tenants should understand and negotiate their obligations for removal of alterations, equipment and other personal property, and the condition in which leased premises must be surrendered at the expiration or earlier termination of the lease term. Failure to do so could result in delays in a tenant’s ability to vacate the leases premises as well as unforeseen significant costs.

Most commercial leases provide that alterations and improvements made by or on behalf of a tenant become the property of landlord and must be surrendered with the leased premises upon expiration or earlier termination of the lease unless landlord requires removal. We suggest tenants request language in the lease requiring landlord to advise at the time it consents to such alterations and improvements whether or not the same must be removed, rather than landlord having the right pursuant to the terms of the lease to demand removal at the time of expiration or earlier termination. Having such a term in place eliminates the element of surprise and provides tenant with certainty as to which alterations and improvements tenant is required to remove. Tenants may also want to limit the removal requirement so that any alterations or improvements that cannot be removed without significant damage are to remain in the leased premises upon expiration of the lease term.