January 6, 2025

When a commercial tenant surrenders a space to a commercial landlord, sometimes: (a) the landlord wants the tenant to leave certain personal property behind; and/or (b) the tenant does not want to take certain of its personal property with it. Such personal property is often referred to as “FFE” (furniture, fixtures, and equipment).

The landlord often wants the FFE to remain in the space if its presence would make it easier for the landlord to rent the space to the next tenant. For example, if the subject premises is a restaurant, then it may be easier to rent to the next restaurant tenant if the outgoing restaurant tenant leaves the pizza oven, the coolers, and the tables and chairs. Sometimes an outgoing tenant simply finds it easier not to move its personal property, so the tenant will ask the landlord if it is willing to purchase its FFE.

I have had many litigations end with mutually beneficial surrender agreements that include the transfer of FFE from the landlord to the tenant for restaurants, hair salons, and offices.

Here are some tips for drafting a surrender agreement that includes the sale of the tenant’s FFE to the landlord.

(1) Define FFE specifically. Whether you use an exhibit to the agreement or include the list within the body of the agreement, make sure it is clear exactly what is being sold and what is not. Pictures can be helpful here, if the FFE includes furniture. Lists of serial numbers can be helpful if the FFE includes office machinery, like copiers.

(2) Include a provision in the agreement that the tenant shall take whatever steps are necessary, before the vacate date, to sell, assign, transfer, convey, and deliver to the landlord, free and clear of any encumbrances, all of the tenant’s right, title, and interest in the FFE.

(3) The tenant should warrant that there are no liens of any kind on the FFE; and that Tenant is representing that it has the right to convey the FFE to Landlord. This is important because sometimes tenants finance FFE, as opposed to owning the FFE outright.

(4) Specify the condition of the FFE. This protects the tenant. Usually this simply means including “as is” language.

(5) Include language that the following will also be transferred from the landlord to the tenant, with respect to the FFE: account numbers, user names, passwords, and any other credentials; warranties and instruction manuals; schematics. For example, I recently had a case where the tenant was leaving the alarm system for the landlord, and the landlord’s building engineer wanted the schematics of the alarm system.

(6) The last tip raises another good point, which is that decisions about the landlord purchasing the tenant’s FFE should not be made exclusively by lawyers or even by the principals of the parties. It makes a lot of sense to involve brokers and building engineers in these decisions.

(7) I usually add a line in the agreement that says something like: “For the avoidance of doubt, the goal of the aforementioned transfer of the FFE from Tenant to Landlord is that Landlord shall be able, by the Vacate Date, to independently operate the FFE.”

(8) Make sure you are clear about how the tenant is being compensated for the FFE. Is the landlord paying the tenant for the FFE or is the tenant being compensated via an abatement of arrears?

(9) In the default provision of the agreement, make sure to provide for what happens to the FFE part of the deal if either tenant or landlord default.

Respectfully submitted,

Michelle Itkowitz