Restoration and Removal Obligations in REBNY Leases

June 12, 2018 | By Charles Botensten

Q: I am a licensed real estate salesperson and I am representing a commercial tenant who is concerned about her potential removal and restoration obligations as they are stated under Article 3 of the REBNY commercial lease form. What exactly does Article 3 state and are there any fair modifications that a tenant may suggest to alleviate the tenant's concerns regarding the language of this provision?

A: Article 3 of the REBNY commercial lease form ("Article 3") provides, in part, that a landlord may, by notice to the tenant of not less than twenty (20) days prior to the lease termination date, elect to have the tenant’s improvements (the "Improvements")  removed from the premises by the tenant.  Accordingly, the tenant must repair and restore the premises to the condition that existed prior to installation of the Improvements and the tenant must repair any damage to the premises or the building caused by the removal of the Improvements. 

Tenants will frequently request an opportunity to negotiate Article 3 and there are several compromises that a landlord may find acceptable in order to reach an agreement on an amended Article 3. These compromises may include:

1.     An agreement that tenant is not required to restore the premises to their condition prior to the construction of the Improvements.
 

2.     An agreement that the tenant shall not be liable for any minor damages to the carpet, ceiling and/or walls caused by the tenant's removal of the Improvements.
 

3.     An agreement that the tenant shall not be required to remove the Improvements unless the landlord requests that the tenant does so when the landlord approves the Improvements. If the landlord fails to notify the tenant at the time of the approval of the Improvements, then the landlord waives the right to require removal of the Improvements.
 

4.     An agreement that the tenant shall only be responsible to remove "Specialty Alterations" made to the premises, as opposed to the removal of all Improvements.  A "Specialty Alteration" is generally defined as those alterations, installations, additions or improvements consisting of raised floors, vaults, filing systems, internal staircases, dumbwaiters, pneumatic tubes, vertical and horizontal transportation systems, any alterations which are structural in nature or penetrate or otherwise affect any floor slab and any textured, mirrored and/or decorative walls, ceilings, floors and other alterations of like character or nature. 
 

5.     An agreement that the tenant shall not be required to remove any Specialty Alterations unless the landlord requests that the tenant does so when the landlord approves the Specialty Alterations. If the landlord fails to notify the tenant at the time of the approval of the Specialty Alterations, then the landlord waives the right to require removal of the Specialty Alterations.

Important Tips: Please contact legal counsel if you have any questions regarding how these provisions can be negotiated from a landlord and tenant perspective.

For additional insight, please watch this video

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP