In 2004, the New York City Building Code was amended to add Local Law 26/04 requiring all owners of office buildings one hundred (100) feet or higher to have sprinklers installed throughout their building on all floors by July 1, 2018. In addition, a report must be prepared by the owner’s architect or engineer certifying that the installation is completed by July 1, 2018. Interim reports are required to be filed approximately every six (6) years (beginning in July 2005) by owners. You should check with your counsel to confirm that you are in compliance with the law with respect to filing the interim reports.
How much will it cost to comply with this law? In polling a few architects and engineers, they have indicated that the installation of new sprinklers throughout an office building could cost anywhere from $4.50 – $6.00/sq. foot, which means in a 50,000 sq. foot office building, the cost of installation, at a conservative $5.00/sq. foot, would run an owner approximately $250,000.00 not to mention the associated issues of coordinating such work with the tenant and the disruption it may cause to the tenant’s business.
As an owner, you may ask yourself with respect to existing tenants, who will bear the cost of complying with this law, the owner or tenant? The answer depends upon what is in the office lease.
Arguably, if you use the most recent 2004 version of the Standard Form of Office Lease published by the Real Estate Board of New York, an unmodified paragraph 6 of the Standard Form captioned “Requirements of Law, Fire Insurance, Floor Loads” protects the Landlord from paying for the cost of the sprinkler installation insofar as the provision provides that “Tenant, at its sole cost and expense, shall promptly comply with all present and future laws. . . which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant’s use or manner of use thereof (including Tenant’s permitted use) or, with respect to the building if arising out of Tenant’s use of the demised premises or the building (including the use permitted under the lease).” Assuming you use the 2004 Standard Form Office Lease and the paragraph has not been changed or negotiated by tenant’s counsel when you entered into the lease, an owner should be protected from not having to pay the cost of the sprinkler installation. If you don’t use the 2004 Standard Form of Office Lease or the Standard Form has been modified and you have questions regarding compliance with the law, you should consult with counsel to determine your best course of action.
With respect to new tenants and tenants that you will be entering into lease extensions within the coming years, owners should pay particular attention to this provision since many attorneys who represent tenants in office leases are aware of this new law and are savvy at negotiating this provision with owners. In order to help such owners who are faced with drafting extensions or new leases with terms through July 2018, we have fashioned an owner friendly sprinkler provision that will protect an owner from having to pay for this expensive compliance requirement.