Southern California Commerical Real Estate Lawyer & Attorney : Aronson Light Law Firm : Los Angeles, San Fernando Valley, California

With so many new studies and information emerging regarding the health and financial effects of smoking and second-hand smoke, many states and localities have strengthened their anti-smoking laws. As a result, both Landlords and Tenant must educate themselves on their state, city and county current anti-smoking laws.

In California, smoking is banned in all workplaces and within 20 feet of any door or window of a government building (including any building not owned but leased by a government entity and any public building leased to a private entity). Many cities have enacted even more strict laws. In 2006, for example, Calabasas, California enacted possibly the most severe smoking restriction in the country. Under this ordinance, smoking is forbidden in all indoor and outdoor public places, common areas of multi-unit residential buildings, and even open areas of hotels, bars, and restaurants. 

On May 1, 2007, a new Arizona law went into effect which banned smoking in all workplaces, including restaurants and bars. The statute also prohibits smoking in enclosed areas, public places and areas within 20 feet of any retail or commercial building.

Owners and property managers must try to stay on top of any new laws which affect how they manage and control their center. The smoking laws of many states require that very specific types of signs be posted, ashtrays be removed and that any offender be notified of his or her illegal behavior and requested to stop immediately. 

Besides being an additional compliance burden for the Landlord, it can also be a tenant headache. If the tenant controls any patio or other outdoor area, or if the tenant operates in a state where smoking is prohibited within 20 feet of any business entrance, then policing smokers becomes a tenant responsibility as well. Many municipalities' laws provide for a fine or citation for each violation, and if the party in control of the area does not comply with the statute, it can be fined and cited - not just the smoker. Also important to note is that a tenant could easily be in default under its lease for noncompliance with applicable law. Tenants should be especially wary if their leases contain any provision which takes away any of their rights (e.g., options to extend, etc.) should they, at any point during the lease, be in default under the lease, even if such default is timely cured.

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Strip mall or single-tenant building landlords often rely on pre-printed lease forms in an effort to keep costs down and simplify leasing. For some properties this works well enough, but only where the type of tenants are well suited to the lease form. Many landlords attempt to use an industrial tenant lease form for a restaurant, for example, or a single-tenant lease form for a multi-tenant building, resulting in an ill-fitted lease where the tenant suffers. In an industrial tenant lease, such as the AIR Industrial/Commercial Tenant Lease form, the tenant typically pays for any malfunction or failure of the HVAC system after the first 6 months of the Lease, and all "other elements" of the premises after 30 days. In addition, this form requires the tenant to share in the cost prorata of any capital improvement for the entire Project or Building. Particularly if this is small strip mall with two or three tenants, this cost could be enough to put the tenant out of business. Similarly, in a single-tenant lease form, the tenant is often required to replace and maintain all of the building systems, roof, exterior of the building, etc. Tenants of a multi-tenant building with shared building systems, roof and building exterior should share such maintenance and typically, the Landlord would replace such items (perhaps with the cost amortized over the useful life) and pass portions of the cost through to all of the tenants annually. An inappropriate Lease form could easily cost a tenant thousands of dollars over the lease term.

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Most commercial leases require some level of costruction or remodeling to make the leased premises suitable for the tenant.  The following are some key issues to consider when entering into a lease that requires construction or remideling:

• What type of shell is being delivered? Is the Landlord going to demolish the prior tenant's build-out? If so, is the Landlord delivering the space vanilla shell or build-to-suit? Does the lease contain detailed descriptions of the scope of each party's required work?
  
• Tenant Improvement Allowance: How much, how and when is it paid, is it enough? If the tenant does not use the full TI allowance, can Tenant keep the unused amount?
  
• Does the TI Allowance cover architecture and engineering fees, or just contractors, subcontractors and materials?
  
• Can the tenant keep any of the existing improvements of the prior tenant (i.e., the HVAC unit)?
  
• What type of Landlord review of Tenant plans is required? When are plans due to the Landlord? How long does the Landlord have to review them before getting back to the Tenant?
  
• Does Tenant's construction have to be completed by a certain time? If so, are there penalties incurred if not completed by this deadline?
  
• Does the Landlord get paid an administrative fee to review the construction (frequently 15%)? Is the Landlord paid an additional fee to review plans?
  
• Is the Tenant required to use union labor?
  
• Is the Tenant required to get its general contractor approved in advance or does the Landlord get to choose the contractor?
  
• Does the Tenant Improvement Allowance have to be paid back to the Landlord if there is any default under the Lease? If so, is it a full reimbursement or is it amortized over the lease term?
  

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