Retail leases usually contain provisions addressing the responsibility for maintenance and repair of the leased premises or shopping center. Two areas that can give rise to lease- language-interpretation problems are replacement and structural repair. Leases often use the terms "structural" and "nonstructural," but frequently these terms are not defined.
Similarly, many leases do not expressly place the burden of making replacements on either party. It is essential to define what these responsibilities include and who is to perform them.
Structural vs. nonstructural repair Generally, no test has been developed to determine what constitutes a structural repair. Courts are often left to look at each repair on a case-by-case basis, which can result in a nasty surprise for the party that is unexpectedly responsible for a certain repair. Load-bearing or exterior walls, joists, support beams and support columns, or the parts of the premises that support the weight of the building, almost always are found to be structural.
The problem is determining whether other building systems should be deemed structural. Work that has been held by various courts to be structural includes connection of a sewage line to a municipal system and replacement of an HVAC system or roof. In contrast, repairs to an underground water main, replacement of fallen plaster, and repair of gutters and downspouts have been deemed nonstructural.
To minimize uncertainty, in leases where the landlord takes on responsibility for structural maintenance and repairs, the lease should include a specific list of items that the landlord will have responsibility for - e.g., roof, load-bearing walls, support columns and the like. The lease should explicitly place the burden of maintaining, repairing and replacing all other portions of the premises on the tenant.
The tenant should expect to assume the maintenance responsibility for the interior, nonstructural portions of the premises, but should try to pass to the landlord responsibility for improvements that are integral to the structural integrity of the shopping center (e.g., floor slab and sub floors) or would require access to areas outside the premises (e.g., common utility lines). Additionally, tenants should try to avoid costly work that would make the lease deal unprofitable (e.g., replacement of the HVAC system).
Repair vs. replacement Many leases define the tenant's maintenance obligation as a duty to "keep the premises in good order and repair." Without more, this language could preclude a landlord from requiring the tenant to perform replacements.
The courts of many jurisdictions tightly define the word "repair." For example, one landlord in Illinois was found to be responsible for replacement of a roof even though the lease obligated the tenant to make "all repairs." Most courts look at the word "repair" to mean putting a pre-existing item back together, or replacing a part of an item, as opposed to obtaining an entirely new item. The general view is that "good repair" does not require the full replacement of an item that is so run-down it cannot be repaired.
Indeed, even when the lease required the tenant to "keep the premises in good repair, including replacements," this language was held not to place the burden of making replacements on the tenant. Instead, the court determined the tenant only had to keep existing replacements in good repair.
Therefore, in addition to an obligation to "repair," leases should contain a specific, separate duty for "replacement" and expressly allocate that duty to either the landlord or the tenant. The "repair" and "replacement" obligations should be separately stated. Particularly if the tenant has the obligation, the lease should be clear that the duty is imposed even if the expense is great enough to constitute a capital expense.
By being more specific about maintenance responsibilities, landlords and tenants can save themselves time, aggravation and money.