Friday, December 12, 2014

My #CRE ROOF is what?

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As SoCal braces for STORM WATCH 2014 and we receive some MUCH NEEDED RAINFALL, owners throughout Orange County, California can hear the collective screams of HELP from their occupants as seemingly water tight roof membranes start to leak.

One of the most common questions, we are asked by occupants of industrial/commercial real estate is, "who is responsible for the roof?" As I sit in my dry office penning this post, it is pouring down rain in SoCal. I felt the post was timely.

So let's dig in, shall we? Please understand that this post is a laymen's interpretation of the mechanics of roof responsibility and is not intended to be legal advice. I am not an attorney, nor do I play one on TV.

Before the water comes pouring into your office or warehouse from the latest downpour, do yourself a favor, grab a copy of your lease (if you have one) and take a look at a couple of areas.

First, take a look at the heading across the top of the first page. There you should find reference to "Net" or "Gross". This is an important distinction, as the main difference between the two leases is the roof responsibility. The vast majority of leases in Southern California are on a form known as an AIR form and could read something like this..."AIR Commercial Real Estate Association Standard Industrial/Commercial Single-Tenant Lease--Net". Generally, in a Gross lease the owner is responsible for the roof and in a Net lease the occupant is responsible. There are some specifics, however, that should be understood.

Next, take a look at a paragraph entitled Maintenance and Repairs. In the AIR leases, the paragraph is 7 on page 5 and 6.

Responsibility for the roof on an industrial/commercial building is specifically broken down into three categories...maintenance, repair, and replacement. You should read how your specific lease deals with each item.

Maintenance: Most leases (and definitely the AIR forms) specify which party maintains the roof and call for the maintainer to have a service contract for the maintenance. Many maintenance contracts include an annual visit for removing debris from the roof and making sure that the downspouts are clear. Sometimes roof leaks occur when ponding builds at the downspouts because they are clogged. The puddle sits at the low point of the roof, weakens the membrane and leaks occur. Another culprit is the area around roof penetrations (such as HVAC units) that are not properly masticked. When the mastic becomes dry and cracked, the material loses it flexibility and water can seep through. A normal maintenance visit can shore up these issues and prevent leaks during the rainy season...when we have a rainy season!

Repair: Once again, most leases outline which party is on the hook to repair a roof if repairs are needed. In the case of a Gross lease, the owner performs the repairs and in a Net lease the repairs are the occupants to perform except to the extent that the repairs exceed 50% of the price to replace the roof.

Replacement: In a Gross lease the owner is responsible to replace the roof at his sole cost and expense. In the case of a Net lease, the owner is generally also responsible but only when the cost of repair exceeds 50% of the cost to replace. Within the AIR language, the owner replaces the roof, at her expense, and then amortizes the cost over 12 years.

So, in the case of a Gross lease, blow up your owner's phone. In a Net lease, HELP is all you. Call a roofer!

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