HVAC maintenance is nearly always addressed in strip mall leases, and in most cases it is the tenant’s responsibility. Over the years we’ve discovered that the great majority of tenants do not properly maintain their HVAC units. Following are some major changes we have recently made.
Globally, we have offered to take on the maintenance and charge back the costs as a CAM (Common Area Maintenance) item. In most cases we can do it for less than the tenant.
To start, we sent letters to all tenants, advising them of this change. We told them that we would be starting within 60 days, however if they could provide invoices of quarterly maintenance (our stipulated maintenance period in the lease) we would delete them from the service. We had exactly 7% of the tenants submit these invoices. As we suspected, they’re not maintaining their HVAC units.
We then bid the service scope to several HVAC contractors recommended by our property management company. We specified quarterly filter changes and semi-annual inspections. Any repairs will be charged directly to the tenant.
There are two arguments to this policy. One, the obvious, is that if the HVAC unit needs repair or replacement then the tenant is obligated to do it. True. Now, get them to do it! They are also obligated to pay contract rent, and like most strip mall owners we’ve had to reduce that since 2008 to keep them in place. With the strip mall owners taking on the maintenance and repair task, we will undoubtedly extend the life of the HVAC units and save money over time.
The second argument is that by taking on the maintenance we become responsible for repairs as it was our maintenance company servicing the units. That has been our concern for years, and why we have not opted in to this concept of owner directed maintenance. To ensure the survival of the maintenance responsibility of the tenant in the lease, we were very clear in our letter than their obligations or responsibilities would not change, only the maintenance company unless they could prove that they had been maintaining the HVAC units.
We are too early in the process to evaluate the results, however it’s difficult to argue that we as owners controlling the maintenance of a very expensive item is an improvement. How about you? What do you do for HVAC maintenance?