Real Estate Landlord’s Work – Be precise as to what exactly the landlord’s work will be

Published on Thursday, 19 September 2013 12:38:30    Written by Marc
A while back, I was leasing a site for a business unit of the company I was working. The site had previously been used as a clothing manufacture and was being retrofitted to become an office building. The site was well located; right in front of a metro station and the size was good. From the first visit of the floor that interested us it was obvious that the site was in need of serious work. During the years that the building had been used as a manufacture, there was no ventilation or air conditioning, only heating that came from hot water heaters installed all around the exterior walls. It must have been ridiculously hot in the summer but in the 50’s and 60’s things were a lot different.

EnExPlan-web-1We agreed with the landlord to take a little over half of the floor, which represented about 40,000 square feet for our space. Considering the fact that we did not want to engage ourselves in installing the base building HVAC system (something not recommended when leasing an old building), we made a deal with the landlord that he would prepare the base building, install all HVAC ready for distribution (we would simply provide the end duct systems for the open and closed offices and the landlord would keep but repair the water heaters. These heaters were simple water radiators that were located on the exterior walls and provided the bulk of the heating to the space. They were showing their age and we raised the concern that considering we were preparing to invest a few million dollars in the site, the least we could ask for is to have water heaters that looked acceptable. We had noticed that there were so many water heaters and the landlord informed us that this was the only heating system in place at the time. We asked the landlord what he was planning to do with the covers of the water heaters since over the years; they had been banged, bruised, punctured, and warped.

To ease our concerns, the landlord invited us to see another floor that the landlord had done for a tenant. On the floor that the landlord had retrofitted and leased to the tenant, we could see the covers for the heaters were not new, but they did not seem dented at all. The landlord assured us ‘don’t worry, it will look good’ and we were happy with the result so we closed the deal and the landlord began his work while we began planning ours. In retrospect, we should have been much more precise in our agreement.

Our project went well from our side, with an investment of a little over 2 million dollars; our offices were almost done when we started to notice that something with the water heaters was not right. Our landlord, in an effort to save some money, had tried his best to repair the water heaters but the front panels of many of them were still looking horrible. The main problem came from the fact that these had been made in the early 1950s and were obviously not available anymore, so the landlord removed the front panel, which was severely dented from years of wear and probably some abuse, and had the dents removed by simply banging them with a hammer on an anvil. Then a coat of paint or two was slapped on to the panels and that was about it. I could just imagine the poor worker assigned to the job of doing that. The results were at times almost ok but for most of the panels, the results were horrible and, my co-workers were not impressed, especially since everything else around, i.e. our office, was brand new. Try to explain to our CEO that after more than 2 million dollars invested in new offices, we had these horrible looking 1950 era water heaters all along the exterior walls. It was bad enough we had to compose with them during the layout of the closed offices (as many where located right between two offices), this was not going to stand for us and we requested a meeting with the landlord at once to tell him what he needed to do, or so we were thinking.

The landlord met us and was polite but surprised at our request. He replied to us with all the seriousness in the world that his obligation was limited to repairing the water heaters and not to replace the front panels. I asked him how come on the floors we were shown initially, the front covers did not seem dented at all. He replied that when they started to retrofit the floors, he started by taking from other floors the best cover heaters he had to avoid the cost of removing the dents, so in essence he cannibalized the other floors to have a few floors with good looking heater covers. He was now telling us that all what was left for us were all the worse dented covers in the building. No wonder they were all dented, I actually wondered for a while what had happened in that building, did people actually go around with hammers to bang the heaters on purpose. However, nothing happened, we had on half of one floor all the worse covers from the previous 11 and half floors. No wonder.

There was no way we were going to get him to purchase and install new front panels. Months of negotiation and sending back dozens of front panels to the guy with the hammer and the anvil to remove more dents and apply more paint and my co-workers ended up living with the panels and hating them each day. Over time, with furniture, plants, and many other things that come to cramp any office space, people saw them less and less and the conversation over the ugly panels rather went away. Nevertheless, this was a lesson for me. After that, each time I went to lease a site that was to be retrofitted by a landlord I would become maniac for details as to what the landlord was going to do, I wanted to know precisely what the landlord meant by repair, fix, restore, retrofit and I became very skeptic of expressions like ‘don’t worry it will look good’. The next time I heard an expression like that, I started to be deeply concerned.

I guess the morale of this is whenever negotiating terms of what the landlord will do in terms of work, take some time to really define in details

  • What the landlord will do
  • When the landlord will do the work
  • Will the landlord use new or recycled materials
  • Can the landlord show a photo, model, plan that would help detail what it will look like
  • Is there a neutral arbitrary that can decide if we do not agree in the end
  • What legal recourse will be have