The concerned call …
Recently, I received a phone call from a friend of mine who is the COO for a mid-sized commercial property management company in Central California.
He had just received a rather official-looking PDF that was marked “Certified by Legislative Counsel of California” and titled Assembly Bill No. 2093.
The document, approved by the Governor September 16, 2016 and filed with the Secretary of State on the same day, broadens the language in the state of California between leasing and the need for a CASp Report on the “premises”.
Before you throw up your hands in disgust over the ever-growing burden of ADA compliance, let me tell you what it all means (especially if you have tenants and work with leases).
Existing law requires a commercial property owner or lessor to state on every lease form or rental agreement executed on or after July 1, 2013, whether the property has been determined by a CASp to meet all applicable construction-related accessibility standards.
Translation? Today, right now, your leases should contain language that states something along these lines … (consult your attorney for specific language) …
- “Has the property been inspected by a CASp?” Yes or No?
- If Yes; Has the property been determined by a CASp to meet all applicable construction-related accessibility standards?
So, from July 1, 2013 to now, you should have this info on your leases.
What does Assembly Bill 2093 do?
This Bill essentially changes the term “property” to “premises”, broadening both the term and the ambiguity! No longer is it just the “property” that needs a CASp Report but the “leased premises” needs one as well.
What’s the difference between the “property” and the “premises”?
In most people’s minds, property means the exterior portions of the property. The “leased premises’” refers to the actual tenant space being rented.
If you lease space, it’s really an “If-then” scenario.
No doubt, you’ve heard the saying, “If-then”, right? If this or that is true, then you do this or that. So let’s go through a few “If-then’s” …
If: You have a current CASp Inspection Report on the property (the outside and common areas) but not the individual tenant spaces.
Then: When a potential tenant shows interest in a specific space and they ask about the level of accessibility or if a CASp inspection has been completed on this specific space, you the landlord are now required to engage in dialogue with this prospective tenant on several items.
- What is this new potential tenant going to use this space for?
- Is the new tenant going to take the space “AS-IS” and is the existing interior including the restrooms staying in place?
- Or is the new tenant planning on “gutting” the entire interior and starting over?
This is critical for the landlord or property manager to determine up front. This will help the landlord determine if a CASp inspection of the interior space is indeed needed.
If: You have a tenant that’s up for renewal, and they want to renew in place with no changes to their lease terms but they ask if you have a CASp Inspection on their premises (their suite).
Then: You must either hire your CASp to come out and conduct an inspection of your specific tenants’ space or allow your tenant to hire a CASp to perform the inspection
If: You have a tenant that vacates the space (their lease ends and they leave) and no new prospective tenant is interested in the space yet.
Then: You have two options. Either inspect the newly vacated space so that you know what barriers exist or wait until you have a prospective tenant and find out what they will be doing with the space before you make a decision. Let’s face it, we don’t know what will be done to the vacant space until we have a prospective tenant and we find out if the tenant is going to take the space “as-is” or if they are going to gut the suite and remodel the space to meet their specific needs. So why pay several hundred dollars to inspect a vacant space if the new tenant is merely going to gut and rebuild to meet current codes?
If: You have a Triple-Net Tenant (NNN) who is responsible for their own space and they renew without any changes to their space.
Then: The existing tenant most likely is satisfied with the space and since the tenant is not going to make any changes, then there is NO trigger event at the City/County level to require upgrades to be made. In other words, the only real reason to inspect a “renew in place Triple-Net tenant would be to identify any barriers within their space that the tenant would then pay to have removed. Probably not going to see this happen very often.
If: You have a Triple-Net Tenant (NNN) who renews but wants to make changes to their space.
Then: Work with your tenant and allow them to hire a CASp to inspect their space. The tenant will then identify any barriers that exist and get several contractors to bid the barrier removal so that they (the tenant) is prepared to meet the 20% accessibility requirement based on their remodel work at the City/County level.
Keep in mind landlord, that whatever your tenant is going to do on the interior of their space will trigger the “path of travel” requirement that services their altered space.
A few thoughts …
The reality is, no property owner/manager is going to go out and spend the money to create a CASp Report on every space in their building or portfolio. It’s just not practical. Why? There are too many moving parts as well as issues of responsibility (Tenant vs. Owner in the specific tenant improvements, etc.)
Where do you go from here?
To recap, I would first ensure you have the appropriate language in your leases now — that’s a priority.
With the new broad-based language of “premises”, I would make sure your lease language says “premises” and not just “property”.
Make these changes to your lease agreements NOW and understand that if you are a landlord or a property manager that deals with tenants and lease agreements, you must work with your existing tenants and all prospective tenants if a request for an interior space inspection is requested.
I will keep you up to date as this new law begins to filter through the commercial industry over the next year. I will share with you what is working and what isn’t and how to keep yourself and your investments in a safe position.
If you have any questions regarding this new law, please feel free to reach out to me directly.