The Landlord Blues

By Beth A. Block

Your studio is the biggest billboard you have. When your potential new students walk in the front door, they learn a lot about the kind of martial arts you teach just by looking around. When the public drives by, they see your signage. They can also look through your front windows and see classes going on at night. When your students walk into your studio, they see how seriously you take the art.

When you look for a place to open, you’re thinking more about the marketing benefits of your location than problems that might come up in a year. This is normal and, actually, savvy. You have to study the demographics of the territory. You have to consider location and the amount of rent for the space. Can you afford it?

Presumably, you are not thinking about what might go wrong if you’ve found a great location. But there’s good reason to consider that, too.

Recently, a studio owner found herself in a bad spot because the owner of the building wasn’t responsive. Her lease required her to insure all the buildout in her space. The building was over 40 years old. So, the insurance company wouldn’t insure that buildout until they found out when the building was updated.

Do you know about the updates to your building? She didn’t know. The landlord wouldn’t answer her questions, so she couldn’t tell the insurance company. It wasn’t until the insurance company threatened cancellation that the landlord “volunteered” the information.

This particular landlord set up the studio owner for trouble. He was unwilling to provide the information she needed to meet their own lease requirement.

Another studio owner had a problem with a landlord that didn’t take care of the building. The parking lot had several potholes in it. One of the student’s moms was pregnant. She wasn’t careful where she was walking and fell in the parking lot.

It turned out that the studio owner’s lease put all the liability on him. So, even though the landlord is typically responsible for the parking lot, the studio had to cover the claim since it was their client that fell.

The pregnant mom was put to bed and missed four months of work. All totaled, the claim settled for $69,000.

In another case, the studio had to shut down for three months to clean up the damage done from a leaking roof. The roof leaked because the landlord hadn’t replaced it, even though it was 30 years since the last replacement and five years of leaking in different suites. The landlord was not responsible for the damage because the lease said he wasn’t!

The next landlord problem I’ve seen is how much insurance you have to buy. Many leases require the studio to have liability insurance equal to $5,000,000 (yes, $5 million) for each claim. This costs the studio hundreds or thousands of extra dollars each year. Some landlords will make an exception after I talk to them; others will not provide an exception.

The last problem we’ll look at this month is the requirement to name the landlord as an additional insured. This is a pretty common clause in commercial leases. There are, however, a couple of concerns with this clause.

“Additional insured” means no matter how negligent the landlord is, you will be paying. Think about the parking lot pothole I cited earlier. The additional insured clause got the landlord out of the responsibility.

Imagine, too, a landlord that knows there is lead paint in the building and doesn’t tell you. How about smoke detectors purposely disconnected? Back doors chained shut?

All these examples are some serious liability issues. And you are holding the bag on the landlord’s actions.

I suggest you put your maintenance requests in writing, with proof of delivery, so that you have a record of the request if a claim comes up.

When you’re first looking for a space, you are full of hope and optimism. You aren’t thinking about all the things that might go wrong with the location. Even if you are thinking about future problems, do you understand all the legal jargon in the lease?

I strongly recommend you hire a local lawyer to review the lease before you sign it. Have that lawyer explain to you what responsibilities you have and how you can shift some of those responsibilities back to the landlord, if he/she isn’t taking care of the property.

For more information email me: [email protected]

Beth Block can be reached at (800) 225-0863 or
[email protected].