Get 5 Protections When Letting Tenants Install Special HVAC Equipment

The experience of a seasoned New York City leasing attorney is an excellent source of insight for landlords negotiating a tenant’s right to install a certain type of HVAC equipment known as a split A/C unit, an air conditioning unit that goes through the wall of the leased premises and partly hangs outdoors. 

The interior portion where the controls are located is entirely inside the tenant’s premises, but the part that hangs outside goes through the wall, meaning that its installation affects the building’s structural integrity. The outdoor part is also partially visible from the building’s exterior, making it a potential eyesore, noise nuisance, or danger should it fall. 

All of this gives landlords a vital interest in negotiating a lease clause affording them comprehensive protection. Here’s a briefing on the five protections you need, along with a Model Lease Clause, below, that you can adapt to your own circumstances. Although it addresses split A/C units, the clause can work for other HVAC, electrical, or digital equipment with similar “hybrid” characteristics.

1. Ground Rules for Tenant Installation of Unit 

First, impose specific conditions that the tenant must meet to install a split A/C unit. At a minimum, the clause should require: 

• The tenant to get the landlord’s written approval to the proposed installation plan, including for all parts, labor, services, plans, specifications, and who the installation contractor will be [Clause, par. 1(iv)];  
• The tenant to pay 100 percent of all costs associated with the unit, including but not limited to labor, materials, electricity consumed, repairs, maintenance, and other services [Clause, par. 1(i)];
• The equipment and its installation to comply with all applicable terms of the lease and be “first class in all respects” [Clause, par. 1(ii)]; and
• The equipment and its operation to comply with all legal requirements, including but not limited to, rules governing mandatory minimum distances from windows [Clause, par. 1(iii)].

2. Tenant’s Duty to Maintain Unit

Next, address the tenant’s duties with regard to maintaining the split A/C unit. Make the tenant responsible for maintaining, repairing, adjusting, and replacing the unit “at its sole cost and expense” and ensuring that it does so in a first-class manner that complies with all applicable lease terms, laws, as well as the landlord’s directives regarding aesthetics, noise, or other concerns related to the unit. To the extent that landlords are normally responsible for building HVAC services, the clause should also specify that the tenant is solely responsible for the split A/C unit’s operation and efficiency [Clause, par. 2].

3. Tenant Duty to Cover Unit

Installation of split A/C units may create openings in the walls through which rain, snow, moisture, cold air, or insects can seep. So, require the tenant to fully and securely cover the unit at its sole expense [Clause, par. 3]. 

4. Tenant Duty to Remove Unit

Require the tenant to remove the unit when the lease expires or ends early and to repair any damage to the outside or interior wall or other part of the building caused by such removal [Clause, par. 4].

5. Tenant Duties Related to Unit Maintenance Contractor

Tenants are likely to rely on an outside contractor to maintain and service the split A/C unit. This can create risks to the landlord, especially if the tenant’s contractor has a demonstrated history of damaging other landlords’ buildings. You can guard against this by ensuring the clause requires the tenant to: 

• Provide the landlord with a copy of the maintenance contract within 30 days for the landlord’s written approval; 
• Select a commercial A/C contractor that’s “professional and reputable” and acceptable to the landlord;
• Keep the maintenance contract “in place and in full force and effect at all times” during the lease term, including via executing any necessary renewals or extensions;
• Provide the landlord copies of any extensions or renewals within 30 days of the date the maintenance contract expires or terminates early; and
• Upon the landlord’s demand, provide the landlord evidence that it’s paid all bills due under the contract, renewal, or extension on time and in full.

The clause should also bar the tenant from terminating or amending the split A/C maintenance contract without the landlord’s prior written consent [Clause, par. 5].