May 2010 Archives

May 20, 2010

Philadelphia Façade Ordinance Compels Action by Commercial Property Owners

Building Owners in Philadelphia need to be aware of the February 2010 Philadelphia façade ordinance. This ordinance was enacted in response to the recent high profile collapses of building façades that severely injured or even killed pedestrians walking on the sidewalks.

In a nutshell, the new ordinance affects building higher than 6 stories or that have appurtenances in excess of 60 feet in height. If your building falls into this category, and most of the tall Philadelphia buildings with their intricate ledges and facades do, then you will be required to hire a licensed professional who is experienced in building facades or structural engineering to evaluate your building. The engineer will deliver a report of "safe", "unsafe" or "safe with a repair and maintenance program." If preventative action is required, it must be performed within a very tight time schedule. All of these reports will be filed with the Philadelphia Department of Licenses and Inspections.

The inspection requirement will be phased in over the next 5 years based upon the age of the building. The oldest buildings will require certification by June 30, 2011, and re-inspection is required every 5 years after the initial report. Going forward, we are advising our clients that this will be an issue for both landlords and tenants, as inspections, certifications and repairs will impact tenant costs as well as creating potential business access issues.

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May 6, 2010

Greater Philadelphia Area Commercial Lease Issues: Look Before You Rent

In this current economic climate, Philadelphia landlords are aggressively recruiting new tenants with offers of robust rent abatement and fit out allowances. Since the commercial lease is often one of a small business's primary expenses, it is a good idea to review any proposed lease carefully before signing or making changes to your existing deal.

A thorough lease review is important so you understand not only what the lease includes, but also what the lease does not include; and what terms are implied by law. Often, we see clients presented with lease agreements that contain terms which are unenforceable in court. Although rent, term, purchase options and security deposits are always the key business terms to any lessee, there are other legal issues which must be considered.

While not an exhaustive list, major issues that a tenant should consider prior to signing or renewing include:

1. Never enter into a commercial real estate lease in your individual capacity. If necessary, offer to personally guaranty part of the lease or pay a higher security deposit. Be wary of the landlord who states, "Don't worry. That is why you have insurance."
2. Pennsylvania law does not require a commercial landlord to mitigate his damages. That means the landlord can refuse to sign a replacement tenant and hold you liable for the unpaid rent. Therefore, make sure your lease requires the landlord to mitigate.
3. If a zoning change is required for you to operate your business, negotiate in advance under what circumstances the lease can be terminated if you are unable to obtain either a zoning change or variance. Also, be sure to include in your lease that your landlord has an obligation to cooperate and support you before the zoning board. This may seem like common sense, but you'd be surprised how often it becomes an issue.
4. You may be responsible under applicable law for environmental problems that occurred on the leased property prior to you getting there. Review the environmental and indemnification sections of your lease carefully and ask questions concerning prior "uses" of the property.
5. Be sure that you have meaningful rights if your landlord sells the property.

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