History
In June 2004, the city amended Local Law 5/73 to include Local Law 26/04, which states all owners of office buildings taller than 100 feet will be required to be sprinkled by July 1, 2019. To comply with this new local law it will be a costly undertaking for the landlord. The landlord will have to install tanks on the roof, electric water pumps, drains, water-floor alarms, sprinklers, etc. The landlord must have a report prepared by an architect or engineer confirming that the installation was completed by July 1, 2019.
Cost of Installation
If a building does not comply with this law, how much will it cost to install new sprinklers? It can cost anywhere between $4.00 to $12.00 per square foot to sprinkler a space. For example, if a tenant is leasing 10,000 rentable square feet, it can cost approximately $120,000.
Tenant Perspective
At the time this law goes into effect, there are three situations a tenant can be in:
- They could be in the process of renewing their lease.
- They could be relocating to new space.
- Their lease is not due to expire until a couple years after 2019.
Renewal of Lease
- When negotiating a renewal of a lease that expires prior to July 1, 2019, the tenant should make sure it states in the lease renewal that it is the landlord’s responsibility to have the space sprinkled in compliance with Local Law 26/04. If the tenant or landlord is going to be performing alterations to the premises, then it should be coordinated so that the installation of the sprinklers can be performed at the same time as the alterations to provide the least amount of interruption to the tenant. If no work is being performed to the premises, then the landlord should give the tenant in writing a completion date on when the sprinklers will be installed.
Relocation
- If a tenant is moving into an office building where the space is raw with no sprinklers, then the tenant should have it stated in the lease that it is the landlord’s responsibility to comply with the new law.
Currently in Space that is not Sprinkled
- A tenant who occupies a non-sprinkled space will need to review its lease to determine who is responsible for adhering to the new sprinkler law. In an unmodified version of the Standard Form of Office Lease, paragraph 6 titled “Requirements of Law, Fire Insurance, Flood Loads” states that the tenant is responsible for all future laws. Therefore, unless this clause was modified during lease negotiations, the tenant may be required to cover the cost of installing sprinklers in their space to comply with the new law.
Insurance
Tenants overall insurance coverage may, in fact, be less after the sprinklers are installed.
Direct Operating
If the tenant has an operating expense escalation then the tenant should make sure that the landlord amortizes the improvement cost rather than expense them in the year the improvements are completed.
If you occupy space in a building that needs to comply with the new local law, you should have a real estate lawyer, broker, architect and engineer review your lease and develop a plan to minimize the cost and time associated with upgrading your space to comply with the new local law.
