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How does ADA impact office lease negotiations?

The passage of the American With Disabilities Act of 1990 (the "Act") and its becoming effective on January 26, 1992 is having a widespread impact on all facets of the real estate industry. Virtually all non-residential buildings and types of business are covered by the Act in some manner. The stated purpose of Title III of the Act is to prevent discrimination on the basis of disability by public accommodations and in commercial facilities. This is accomplished, in part, by imposing an obligation to remove architectural and communications barriers in existing public accommodations provided such removal is readily achievable. The Act does not include a precise definition of a public accommodation. Rather, it sets forth a list of examples of public accommodations, which includes most privately owned establishments that cater to the general public.

The Act applies to any person who owns, lease, leases to or operates a place of public accommodation. Accordingly, both the landlord and the tenant are subject to the requirements of the Act. However, the final rules issued by the Department of Justice interpreting and implementing the Act make it clear that responsibility for taking readily achievable measures to remove barriers may be determined by the lease between the parties.

Therefore, it is imperative that landlords and tenants understand the requirements of the Act and the numerous ways in which the Act can impact upon space leases.

The section of the lease dealing with compliance with laws (which sets forth each of the landlord's and tenant's obligations to comply with laws which affect the building and the demised premises) is the primary provision of the lease which will allocate responsibility for compliance with the Act. However, numerous other lease provisions may also have an impact on the landlord and tenant with respect to the Act. include the use clause (which sets forth the various uses for which the tenant is [and is not] permitted in the premises), the assignment and subletting provisions (which set forth criteria governing the tenant's right to transfer its interest in the lease and to permit others to share the premises), the alterations section (which regulates the tenant's ability to make physical changes in the premises), the operating expense escalations clause (which sets forth certain costs of operating and maintaining the building which the landlord may pass through to the tenant), and the indemnification provision (which protects each party from the actions of the other).

Restrictions and responsibilities which a landlord may try to impose on a tenant to protect itself from, or lessen the impact of, the Act, may be unacceptable to a tenant. In today's real estate market, imposing new restrictions or responsibilities may not be practical, as landlords find their ability to locate tenants to be sharply curtailed. Tenants, on the other hand, should be wary in trying to shift the entire burden of compliance with the Act to the landlord, as the consequence may be that a proposed transaction is rendered unprofitable for the landlord. In addition, it may be inappropriate for the landlord to undertake responsibility for compliance with the Act if the obligation arises out of the operation by the tenant of its business in the premises. Accordingly, the lease negotiation process will require the parties to attempt to balance their conflicting interests. In addition, as issues are litigated and decided, interpretations issued and additional regulations adopted, additional considerations may present themselves which will need to be addressed in the lease negotiation process. What appears to be clear is that landlords and tenants must be aware of the concerns of the other so that an acceptable accommodation of each party's competing interests can be reached.
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Title Annotation:Americans With Disabilities Act of 1990
Author:Goffman, Florence R.
Publication:Real Estate Weekly
Date:May 13, 1992
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