This clause sets the condition the landlord must deliver, usually with building systems in good working order, and how long the landlord stays responsible for fixing problems you find after move-in. A related warranty covers whether the building met building codes when it was built, which is not the same as meeting today's codes or suiting your specific use.
What this clause does
Most industrial leases have the landlord deliver the building with its systems in good working order on the day you take possession: electrical, plumbing, lighting, fire sprinklers, HVAC, loading doors and the roof. You are not buying the building, and you cannot inspect every component during a couple of tours, so the lease gives you a window to find problems the landlord must then fix.
Under most standard Southern California industrial lease forms, that window is short, often around 30 days for most systems and somewhat longer for HVAC. Custom landlord leases increasingly offer less, sometimes nothing, with language saying that taking possession means accepting the building as is. On the other side, I have negotiated warranty periods of a year or more when a building's age or condition justified it. This point is usually settled in the lease rather than the proposal, so raise it on purpose.
The compliance warranty is narrower than it sounds. It typically says the improvements met the codes in effect when they were built. It does not promise the building meets current code, and it says nothing about code for your particular use.
Where it goes wrong
The warranty clock starts at possession, exactly when your team is busiest installing racking, moving equipment and onboarding people. Problems surface after the window closes, and the repair becomes yours.
Roofs deserve special attention. Skylights and stained insulation reveal past leaks, and a roof near the end of its life can produce repeated repair bills during your term. Find out the age of the roof and skylights, who is responsible for leaks, and whether an existing roof warranty will be honored.
Code issues tend to appear when you pull permits. Adding office, racking to greater heights, storing higher-hazard commodities or changing occupancy can trigger upgrades to fire protection, accessibility, parking or restrooms. Those costs can dwarf the rent savings you fought for.
Deferred maintenance also gets confused with tenant improvements. An owner that needs to replace a failing roof or worn dock levelers may try to count that spending against your improvement allowance. Keep the two separate: repairs keep the owner's asset working, while improvements tailor the space to your business.
How to protect yourself before you sign
Inspect with purpose. Walk the building outside in and top to bottom: roof and skylights, drains, dock equipment, roll-up doors, the slab, the electrical service and the sprinkler system. Bring the vendors who will run your operation so they can confirm the building supports it.
List known deficiencies in the proposal and the lease, and frame them respectfully. Owners respond better to a clear list of items to fix than to a speech about how rough the building is, and a clear list gives them room to fix things without losing face.
Verify your use with the city. Confirm zoning, whether a conditional use permit is required, and whether your racking height, commodities and occupancy load will require sprinkler or other upgrades.
Environmental history belongs in the same review. Ask the owner what it knows, search the address in your state's environmental cleanup database, and for larger or longer commitments consider a baseline environmental assessment so you are not blamed later for conditions that predate you.
What to negotiate
Ask for a longer warranty on the roof and HVAC, sized to the age of the equipment. Ask the landlord to deliver the building compliant with current code for general warehouse use. Seek a fair split of costs for code changes during the term that are not triggered by your use or alterations. And create a written, photographed record of the building's condition on the day you take possession. If the building needs work you can live with, consider asking for a rent credit or a repair allowance and handling it with your own contractor on your own schedule.
That record protects you again at move-out. Whatever condition you accept without noting it is the condition you will be expected to return. Have a real estate attorney review the condition, warranty and compliance language together, since those sections interact with the maintenance and restoration clauses.
If you are the tenant
- Negotiate warranty periods for the roof, HVAC and other major systems based on their age, and put them in the lease.
- Schedule a system-by-system inspection in the first days of possession so problems are reported inside the warranty window.
- Ask the landlord to deliver the building compliant with current code for general warehouse use, not only the code in effect when it was built.
- Confirm zoning and fire code requirements for your racking height and commodities before you sign.
- Photograph and document the condition at move-in and share it with the landlord.
If you are the owner
- Service and test building systems before delivery so a short warranty period is realistic.
- Keep deferred maintenance separate from tenant improvement discussions to avoid disputes over the allowance.
- Document baseline condition with photos so move-out conversations have a reference point.
Go deeper in Justin's books
Both books walk through leases chapter by chapter, from the tenant side and the owner side.
Your property is really just a large rental car!
Common questions
Is the landlord responsible if the HVAC fails after I move in?
It depends on the warranty period and the maintenance and replacement terms. Many industrial leases make the landlord responsible only for a short window after possession, after which the tenant handles repairs and sometimes a share of replacement. Read the condition clause and the maintenance clause together.
Does the landlord warrant that the building meets current building code?
Usually not. The typical warranty covers compliance with codes in effect when the improvements were built. Upgrades triggered by your use, alterations or permits often fall to you unless you negotiate a different allocation.
What does it mean to accept a building as is?
It means you take the building in its current condition and the landlord has no obligation to fix existing problems unless the lease says otherwise. If you agree to it, inspect thoroughly first and build the repairs into your budget.
General information about how industrial leases commonly work, not legal advice. Every lease is different: have a California real estate attorney review yours before you sign.