Compliance with Laws Clause

Every commercial lease will have some form of “Compliance with laws” provision.  Before signing a lease, it is important to understand what this entails and what your obligations will include.  Two important compliance issues include Americans with Disabilities Act and environmental laws.

Americans with Disabilities Act (ADA)

In the best case scenario, the landlord will warrant that the premises are in compliance with the ADA.  However, if any alterations or improvements will be made to the building or space, it may trigger new compliance issues, and it is important to know whether you or the landlord will be responsible for those costs.  Often, the landlord will agree to bring the building into compliance with the ADA, but the tenant must ensure the layout and design of the premises and their specific use of the space is in compliance with the ADA.  This may mean removing any barriers that may limit access to those with disabilities (members of the public as well as employees), making aisles and hallways wide enough for wheelchair or electric scooter passage, installing low counters for wheelchair users, installing ramps, or changing the entryway to ensure access to the space to those with disabilities.  As you can imagine, these alterations can become expensive very quickly.

Environmental Laws

Depending upon the type of location you plan to lease, compliance with environmental laws may be a very important issue that should not be overlooked.  If you’re renting a small space in an office building, environmental law compliance may be of less concern than if you’re renting industrial space in a building where chemicals and hazardous materials may have been used.

There are a plethora of laws that target environmental contamination and hazardous substances, at the federal, state and local levels.  Each of these, to varying degrees, prohibit, monitor and regulate environmental contamination and clean-up.  At the Federal level, the Resource Conservation and Recovery Act of 1976 (RCRA), deals with contamination leaking from underground storage tanks, and The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or the “Superfund)”, which covers chemical contaminants released from just about everything else. 

Many states (and some localities) have enacted their own environmental statutes and regulations that may have even broader applicability, and more stringent requirements. 

So, why do you as the tenant care about these laws?  First, in the operation of your business, you need to ensure that you are not violating any of these applicable laws.  However, even if you are in compliance, these laws can sweep you into the pool of parties held responsible for contamination at the site and the cost of clean-up  Therefore, it is imperative that the lease state explicitly what your responsibility is and what the landlord’s responsibility is.  If an environmental pollution problem lands at the steps of your business, you have a significant and costly legal problem.  The “joint and several” liability under environmental laws may result in you having to pay the entire cost of clean-up, regardless of our level of responsibility for, or knowledge of, the actual leak.  And if your lease does not include a warranty and indemnity by the landlord, you will have no contractual recourse.

Certain circumstances warrant special care as they are more likely to give rise to environmental issues, including: 

  • If your business involves any of the substances defined as hazardous under any of the applicable laws, as even a slight contribution to a pre-existing problem can expose you to the entire clean-up cost.
  • Significant remodeling that will involve disturbing the ground, which may unearth previously undetected problems and trigger an environmental inquiry.
  • The premises are located by a current or former gas station, where underground storage tanks may fail and contaminate soil and groundwater.
  • Prior tenants in the building or nearby which used toxic chemicals, such as auto shops and dry cleaners. 
  • The building has asbestos or lead paint. 

Depending on your circumstances, you may want to spend the time and money to obtain an environmental inspection before you sign the lease.