When negotiating the terms of a work letter with a tenant, don’t just agree to do a particular item of work “to code,” without listing any specifics or limitations. When not properly defined or limited, the phrase “to code” can be the source of confusion, miscommunication, and litigation.   

It’s not uncommon for tenants to sign a lease without telling the landlord exactly what it needs from the space and how it should be set up to meet those needs. In some cases, the landlord will have a pretty good sense of and confidence in its ability to deliver what the tenant wants and needs from the space without actually checking to see if any special requirements apply under local zoning, building, fire, or electrical codes. Another problem is that code requirements may depend in part on how the tenant will use and what equipment it installs in the space. Even if the landlord knows what the code requirements will be, complying with them may prove more complicated and costly than expected. Result: The landlord and tenant may have totally different understandings of what standards the work must meet to be deemed “to code.”

Example: An office tenant planning to install data processing equipment signs a work letter requiring the landlord to supply electrical outlets and wiring “to code.” The landlord figures it will just install enough wiring to comply with the local building code. But an unexpected problem arises: While the wiring plans might be enough to meet the building code, the local electrical code for the tenant’s data processing use requires six times as many circuits as the landlord expected. The tenant claims that “to code” means the landlord must supply the circuits required by the electrical code; the landlord insists that “to code” applies to building code requirements. The result is a bitter dispute and months of costly litigation.  

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July 27, 2022 — The Habitat Group