Check out this article published in the March/April issue of Az Business Magazine. The article appears as part of the Magazine's "Ask an Attorney" column.
Question 1: I’m a business owner with my commercial lease expiring next year. Given the shift to hybrid and remote work since 2020 and, consequently, a decreased demand for commercial real estate, what should I consider before entering into a new lease?
Answer 1: Timing is critical, as presently, tenants have leverage in negotiating leases with commercial landlords. One area to negotiate is rent. Tenants can offer below-market rent or smaller annual increases (2% vs. 3-4%), abated rent for the first handful of months, and tenant improvement allowance (known “TI Allowance” or “TI”) for upgrades to the premises which could consist of new carpet, fresh paint, or HVAC upgrades, with the cost amortized over the term of the lease.
Other negotiation areas include early termination rights, right of first offer (“ROFO”) or refusal (“ROFR”) on adjacent space, renewal options with defined rent, and assignment and subleasing flexibility. All commercial tenants—especially Arizona tenants—should consider negotiating maintenance and repair obligations for HVAC issues given the oppressive summer heat, as well as roof, and structural repairs. (This is very important if the existing HVAC units are near the end of their useful life, in which case, they require inordinate repair and maintenance.) Tenants should also push for clearly identifying the criteria for a “replacement” vs. “repair” (which are typically, “landlord” vs. “tenant” obligations, respectively) of the HVAC to mitigate financial risk, and rent abatement for days when the HVAC system fails to perform. An objective “standard” for performance would also avoid disputes as to whether the HVAC system is performing.
Question 2: Why does it seem that telecommunications infrastructure is always being deployed closer to my home, and should I be concerned about potential exposure to radio frequency emissions?
Answer 2: It’s not a coincidence that you may be noticing telecommunications wireless and infrastructure providers deploying technology closer to your home. Since “1G” (first generation mobile network) was launched decades ago, the demand for wireless service has increased radically. By the time most of us purchased a cell phone, our signal was transmitted by the 3G or 4G network, which offered faster service, internet browsing, email, and usage of applications. Conversely, today approximately 97% of adult Americans own a cellphone.1 83% of people ages 3 and older in the United States used the internet in some fashion in 2023.2 The latest advancement in the telecommunications industry—5G technology—supports medical devices, regulates heart monitors, and reduces latency to assist in real-time surgical procedures.3 Vehicle-to-vehicle communications enable an autonomous vehicle to share information with other vehicles, addressing immediate traffic management demands and reducing automobile accidents.4 Nearly all 911 calls originate from a cell phone.5 To meet these increasing demands, cell sites are increasing in number, and are being deployed closer to residential areas. Nevertheless, don’t worry about the radio frequency exposure from these sites, as it’s on par with the exposure generated by a baby monitor, with no evidence of adverse health or safety effects. The World Health Organization opined that radio frequency exposures from base stations and wireless devices in publicly accessible areas (including schools and hospitals) are normally thousands of times below international standards.6 The technology is constantly reviewed by organizations worldwide and must operate by guidelines set by the Federal Communications Commission for safe operation.
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about the author
Joseph Perotti counsels landlords and tenants in commercial real estate lease negotiations, lending and financing, purchase and sale transactions, and zoning and land-use matters. He also has extensive experience representing wireless and infrastructure providers in environmental due diligence reviews, zoning and re-zoning, and land use appeals.