Protect Your Warranties from Being Voided by Tenant's Self-Help Effort

Issue to Negotiate

A strong tenant forces you to give it a self-help right—that's the right to step into your shoes to do important repair, maintenance, or replacement work if you fail to do that work. But suppose you have warranties on your roof and other items that restrict who can perform repair, maintenance, or replacement work and which materials can be used. Should the lease bar the tenant from doing self-help repair, maintenance, or replacement work on any item that's covered by a warranty?

Owner's View

The tenant shouldn't be allowed to do self-help repair, maintenance, or replacement work on any item that's covered by an owner's warranty. The tenant's work could easily violate the terms of the warranty, and the company that issued the warranty could claim that it's void. The loss of the warranty could prove costly to you when you need to repair, maintain, or replace that item in the future.

Tenant's View

The tenant may argue that the warranty is your problem. It needs a self-help right to do important repair, maintenance, or replacement work that you fail to do—even if the work involves repairing, maintaining, or replacing an item covered by a warranty. If you're worried that the tenant's work could void a warranty, make sure you repair, maintain, or replace the item covered by the warranty, as the lease requires you to do, so the tenant won't have to resort to its self-help right.

Compromise: Require Tenant's Compliance with Warranty

Consider this compromise to protect your warranties if you must give the tenant a self-help right: Require the tenant to get a copy of all warranties covering items to be repaired, maintained, or replaced before resorting to its self-help right and to comply with the terms of those warranties, says New York City attorney A. Barry Levine. There's a Model Lease Clause (see box, at right) that you can adapt and use to set up this compromise in your lease.

How to Get Warranty Protections

Cover these four points in your lease so that your warranties will be protected when the tenant resorts to self-help:

Require tenant to get copy of warranties. When the tenant sends you written notice that it's exercising its self-help right, require the tenant to request a copy of the warranty covering items to be repaired, maintained, or replaced, says Levine. You must supply all related warranty information within a reasonable time after it's requested—say, within five business days, he says [Clause, par. a].

Require tenant's compliance with warranty. Once the tenant gets the warranty information, require it to abide by the warranty's terms and conditions, says Levine [Clause, par. a].

Make tenant liable for noncompliance. Say in the lease that if the tenant: 1) doesn't request the warranty information before resorting to self-help, or 2) violates or doesn't comply with the terms of the warranty, it will be liable to you for any resulting claims, actions, damages, and expenses, says Levine [Clause, par. b]. Suppose the tenant's faulty repair work on the roof voids your roof warranty. You must then hire a contractor to fix the tenant's faulty repair work. The tenant will be fully liable to pay the resulting bill because the warranty will no longer cover the cost.

Practical Pointer: As added protection, make sure your lease's indemnification clause is broad enough to cover all claims by third parties resulting from the tenant's bad acts. That should cover third-party claims resulting from the tenant's faulty repair, maintenance, or replacement work on items covered by a warranty, notes Levine.

Limit tenant's accountability if tenant couldn't get warranty information. Say in the lease that if you don't supply the warranty information within the set time period, the tenant won't be accountable for violating the terms of the warranty as long as its repair, maintenance, or replacement work was performed as required by the lease, says Levine [Clause, par. c]. But the tenant won't be entirely off the hook if you neglect to give it the warranty information, he says. The tenant will remain responsible to you for damages you suffer because, say, the tenant badly repaired the roof, notes Levine.

Practical Pointer: Although our Model Lease Clause lets the tenant do self-help replacement work, you may want to delete all references to “replacements” in your clause if you're signing a lease with a nonanchor tenant, advises Levine. Replacement work—such as replacing the roof—typically involves a major capital improvement expense. You probably wouldn't want a nonanchor tenant to do that type of work, because the cost to you might be immense and you'll want to make sure the replacement work is done right, he warns.

CLLI Source

A. Barry Levine, Esq.: 320 E. 23rd St., New York, NY 10010; (212) 477-5118; blevine2@nyc.rr.com.