Commercial Leasing: Landlord & Tenant’s Responsibilities

NYC-based boutique law firm Pardalis & Nohavicka brings the latest legal updates from the world of real estate to PropertyShark. Pardalis & Nohavicka handles an eclectic array of matters, representing individuals and business owners in civil litigation, criminal cases and business transactions, currently litigating and representing clients throughout the United States and around the world.

The responsibilities of a commercial tenant differ greatly from those of a residential tenant. Negotiations regarding each of the landlord’s and tenant’s responsibilities can become an obstacle, potentially delaying the execution of a lease. In a residential building, the landlord is usually responsible for all carrying costs of the building; a landlord might even cover gas and water fees for the tenants of the building.

However, in a commercial lease, many of the building’s carrying costs get transferred to the tenant as “Additional Rent.” Additional rent consists of fees that the tenant is responsible to pay on top of their base rent. It includes fees like real estate taxes, maintenance fees, insurance fees and other miscellaneous fees. Although the landlord is technically responsible for these costs, each tenant of the building pays their proportionate share of the additional rent.

Furthermore, a tenant in a commercial building is going to be responsible for all costs and occurrences related to the interior of the rented space. This includes all utilities, the HVAC systems, floors, walls, and any construction within the rented premises.  In addition to the tenant’s base rent, and additional rent, the tenant will also be responsible to maintain and pay for their own personal property insurance for items such as equipment and inventory, as well as liability insurance for accidents that may occur.

Even the responsibilities for maintenance and repair in the building will be shared between a landlord and tenant. Generally, a landlord is responsible for the exterior of the building including the roof, exterior walls, and removal of all snow and debris on the sidewalks surrounding the building.

Sometimes, depending on the size of the building and number of tenants, a landlord may shift even these responsibilities onto the tenant. Landlords may even reassign their responsibilities to comply with the American with Disabilities Act (ADA) and Department of Buildings (DOB) requirements onto tenants, which could cost upwards of $10,000 at times. It is also standard for a tenant to be responsible for removal of hazardous waste and compliance with any applicable environmental laws.

It is important for a broker to note how many other commercial tenants there are in the building, in addition to your client. This way, the broker can identify what types of things listed here the tenant will be responsible or liable and what the landlord must cover. An educated broker can give the tenant a more realistic understanding of what to expect.

Taso Pardalis is a founding partner of the Law Offices of Pardalis and Nohavicka, a leading full- service NYC law firm with offices in Manhattan, Queens and WeWork. Taso may be a well-known attorney with many cases making headlines in major media outlets, but at heart, he is a true entrepreneur that believes in supporting the small business community. His areas of concentration are: Intellectual Property, Trademarks, Corporate, Business Law and Real Estate Law.

Real Estate and Corporate Transactions Attorney Nataly Goldstein is a graduate of Cardozo School of Law, where she served as President of the Real Estate Law Association.  She is experienced in both residential and commercial real estate transactions, as well as representing large banks, such as Wells Fargo and Citibank.

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Eliza writes for both PropertyShark and CommercialEdge. Reach her at [email protected]