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Landlord Representations and Warranties

Landlord Representations and Warranties

Most landlords attempt to lease space on an “as-is” basis without representations or warranties regarding the condition of the premises or the tenant’s ability to use the premises for its intended business.  Due to the current market, landlords have been more willing to make limited reps and warranties if requested by tenants.   I have copied a few reasonable sample reps and warranties below.

Condition of the Premises.  The Building is, and will remain during the entire term, in compliance with all applicable laws, rules, regulations, ordinances and local codes, including without limitation, the American s with Disabilities Act and OSHA rules and regulations governing asbestos and asbestos containing materials.  The Building is, and will remain during the term, in compliance with all covenants, conditions and restrictions affecting the Building.  The Building is, and will be upon the commencement of the term of this Lease, free from Hazardous Substances and in full compliance with all applicable Environmental Laws.  As used in this paragraph, the term “Environmental Law” shall mean any federal, state or local law, statute, ordinance or regulation pertaining to health, industrial hygiene or environmental conditions, and the term “Hazardous Substances” shall mean any material, waste, substance, pollutant or contaminant that may or could pose a risk of injury or threat to health or the environment.

Tenant’s Use.  The current zoning for the Building will allow Tenant to use the Premises for the permitted uses set forth in this Lease.  The Tenant’s use of the Premises permitted under this Lease will not violate any Applicable Laws.   Landlord will take no actions that will unreasonably or materially affect Tenant’s ability to conduct its normal business operations in the Premises and use the Premises for the purposes permitted herein.

Landlord’s Authority.  Any individual executing this Lease on behalf of Landlord is authorized to do so by requisite action of the appropriate board, partnership, or other entity, as the case may be.  Landlord has good and marketable fee simple title to the Building, with full right and authority to grant the estate demised herein and to execute and perform all of the terms and conditions of this Lease.

Even with the above reps and warranties from a landlord, I still advise my clients to do their own due diligence and not rely solely on the landlord’s reps and warranties.  Though the tenant is legally entitled to rely on the reps and warranties, the reps and warranties do not enforce themselves.  The tenant must sue the landlord in court for a breach of the reps and warranties and prove its damages.  During any suit, the tenant must continue to pay rent and honor the lease.

To make it more difficult for the tenant to enforce the reps and warranties, a landlord may limit the reps and warranties “to its knowledge,” or more strictly “to its actual knowledge.”  For example, a landlord could make a representation that “no hazardous substances exist in the premises.”  That is a fairly strong representation, because it is false and the tenant has a claim if any hazardous substances exist in the premises.  A more limited representation would be “to landlord’s knowledge, no hazardous substances exist within the premises.”  In that case, the tenant must not only prove the existence of hazardous substances, but also that the landlord knew or reasonably should have known of the existence of hazardous substances.  Even more limited is “to landlord’s actual knowledge, no hazardous substances exist within the premises.”  In that case, the tenant also must show that the landlord actually knew of the hazardous substance, which essentially requires a “smoking gun” type of e-mail, notice, letter or memo to the landlord stating that there are hazardous substances in the premises.

Landlords can further limit the reps and warranties by limiting them to the knowledge or actual knowledge of one or two individuals.  In other words, if the landlord is a large company, the representation is only from one or two persons, not every employee in the company (including janitorial staff that may be aware of issues but not report them to management).

Prior to using any language or concepts from this blog entry, consult with an attorney.

Ryan Rosensteel is a real estate and construction attorney licensed in Arizona. You can contact him at ryan.rosensteel@azbar.org.

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One Response

  1. […] lease forms generally require that the tenant lease the premises in an “as-is” condition (see: https://azleaselaw.wordpress.com/2010/04/19/landlord-representations-and-warranties/).  This is often the case even if the landlord, through its contractor, is making the tenant […]

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