19 STUDIOS AND LEASES
Many artists find their work ideally requires a great deal of studio space. Such space is often only affordable in older structures such as rural barns or buildings in urban districts zoned for commercial or manufacturing use. If the space is unfinished, the artist may to spend a lot of money to secure the necessary utilities and install fixtures. On the other hand, if this installation has been made and paid for by a prior tenant, the artist may have to pay for fixtures that seem neither useful nor aesthetically pleasing. Also, while the artist may wish to reside in the space, zoning laws and regulations may impair the right of the artist to do this and, in some cases, create an occupancy that is illegal. Zoning laws may also affect artists who create studios in residential areas.
Practical Considerations
The artist who is not an expert should find either a contractor or someone else with expertise to examine the building and space for a determination as to whether the structure and facilities will be adequate and safe for the artist’s work and, if necessary, living quarters. An artist creating large and heavy works will have to be certain doorways, hallways, elevators, and loading ramps can accommodate the completed work. An artist who needs power machinery must be certain the building is wired for such use. Heating, plumbing and gas lines must all be adequate for the artist’s needs. Finally, if the building is considered sound, the artist can arrive at a figure—perhaps thousands of dollars—necessary to put the space into the condition the artist desires.
Ownership of Fixtures
The artist faced with such substantial fix-up costs, or perhaps a payment to a previous tenant for fixtures, is now offered a standard form lease by the landlord. A wise course is always to consult a lawyer when confronted with a legal document, and a lease is certainly no exception. The standard lease, developed for commercial space by the Real Estate Board of New York, states, “Tenant shall make no changes in or to the demised premises without Landlord’s prior written consent.” If written consent is obtained and the changes are made, the lease then provides, “All fixtures and all paneling, partitions, railings, and like installations, installed in the premises at any time, either by Tenant or by Landlord in Tenant’s behalf, shall become the property of Landlord and shall remain upon and be surrendered with the demised premises….”
The landlord’s ownership of fixtures at the end of the lease term is a crucial factor with which the artist must contend when the lease is negotiated. The landlord may, in fact, permit the artist at the end of the lease term to sell the fixtures to the incoming tenant. But the landlord generally does not have to do this (except, for example, in New York City where premises covered by Article 7-C of the Multiple Dwelling Law are subject to special rules regarding the tenant’s right to sell fixtures). Also, if the market for commercial space is not good, there may be no incoming tenant and the artist may be forced to leave the space without receiving any payments at all.
The Lease Term
The fix-up costs bear on what the use of the space is truly costing over the lease term. The lease, for example, may provide for an annual rent of $12,000—that is, $1,000 per month. If the fix-up cost is $6,000, there is a substantial difference between the two-year and a five-year lease term on what can be called the “real rent”—the total monthly or yearly cost to the artist as a tenant. If the lease term is two years, the $4,000 of fix-up costs increase the rent by $3,000 each year. The real rent is $13,000 per year, not the $12,000 per year that appears in the lease. But if the lease term is five years, the $6,000 of fix-up costs only increase the rent by $1,200 each year, making the real rent $13,200.
The artist benefits from a longer lease term because the fix-up costs can be enjoyed over a longer period. The artist may, therefore, seek a longer lease term, perhaps five years instead of two years. If the landlord agrees, the artist has the advantage of a rent fixed for a longer term, as well as a longer period to enjoy fix-up costs. The disadvantage is that the artist may wish to move before the end of the longer lease term without being responsible for rent to the end of the term.
Options to Renew
A good alternative to requesting a longer lease is to request, in the lease, the option to renew (which must be definite as to term and rent). Thus, the initial lease term could be two years, but the artist might have the option to renew the lease for another three-year term at a specified rent. This gives the artist the advantage of five years to benefit from fix-up costs, but the opportunity to leave sooner if need be. A disadvantage of asking for an option to renew might occur if the landlord decides the option itself is valuable and insists that the rent during the renewal term be at an increased rate. Whether the option to renew is worth a certain rent increase is a decision the artist has to make on a case-by-case basis. It is also worth noting that when an artist moves into a building scheduled for destruction, renewal options to extend the lease term to the actual destruction date are a reasonable request and can be of great benefit if the destruction is delayed for any reason.
The Right to Terminate
An alternative, even more flexible than an option to renew, is the right to terminate. The artist might, for example, demand the right to terminate the lease upon one month’s written notice to the landlord. Often this right can be exercised only after part of the lease term, perhaps six months or a year, has elapsed. In this way, the artist can take a long lease term while retaining the power to leave at will, without liability for the remaining rent.
Right to Sublet or Assign
A desirable lease clause, particularly important when a longer lease term is obtained, is the tenant’s right to sublet. A typical lease provision reads: “Tenant…shall not…underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Landlord in each instance.” This lease prohibition on underlets or sublets is absolute and the landlord need not justify a refusal to accept a proposed subtenant.
The artist should negotiate for the right to sublet, since such a right will make the artist certain of being able to have the fix-up costs reimbursed—as long as a new tenant can be found who desires the space. A typical compromise sublet clause would require the landlord’s consent for any sublet, but would provide that the landlord cannot unreasonably withhold that consent. If the proposed subtenant is financially responsible, will pay the rent and use the space properly, the landlord will not be able, arbitrarily, to refuse the subletting. When a space is sublet, the subtenant pays the rent to the tenant, who in turns pays the landlord. A simpler method—with the landlord’s consent—is to have the artist assign the lease to the new tenant. In contrast to a sublet, an assignment means the artist permanently gives up the lease and any right to return to the premises and the rent payments will go directly from the new tenant to the landlord. Nonetheless, the artist will still usually be liable for the rent if the new tenant defaults.
The limitation of a sublet or assignment clause is that the artist has only the right to find another tenant as a replacement. If another tenant can’t be found, the artist will remain responsible for the rent. When the lease has an option to renew, of course, the artist’s responsibility for rent ends with the initial lease term and only continues for the renewal period if the artist exercises the option to renew the lease. The right to terminate would also protect the artist as to remaining rent. Ideally, in order to have maximum flexibility, the artist should seek either an option to renew or a right to terminate, as well as a right to sublet or assign.
The artist should be aware that the lease may contain costs other than rent. For example, the artist in a commercial space will usually be responsible for making all nonstructural repairs. The artist must be certain who will pay for electricity, air conditioning, and even water. The lease may provide for escalations of the artist’s rent in proportion to increases in the landlord’s real estate taxes or other expenses, such as that for heating fuel. Indeed, the lease may even contain a cost-of-living clause that increases the rent automatically to keep up with inflation. If the artist cannot negotiate these clauses out of the lease, a current cost for the landlord on each item should definitely be specified in the lease to establish an objective basis upon which future increases can be calculated. But the artist should try to include a maximum cost beyond which there can be no increases. In each of these cases, the artist must attempt to approximate costs, perhaps by inquiring of the landlord and other tenants as to past increases or by relying on an expert’s opinion, so these costs can be added into the calculation of real rent.
Violations
The lease will also provide that the tenant must not use the space in violation of the building’s certificate of occupancy and that the tenant must act promptly to end any violations arising from the artist’s use or occupancy of the space. This sounds ominous, but may in fact not create a problem. If a violation is found, the artist at least has the opportunity under these lease provisions to correct the conditions causing the violations before the landlord can seek eviction. The artist should try to avoid any clauses that might allow automatic termination of the lease if violations are not corrected within a limited time period, such as ten days.
The Use Clause
An important lease clause is one that specifies what use may be made of the space by the artist. For example, this clause might provide, “Tenant shall use and occupy the demised premises for an artist’s studio and for no other purpose.” It is generally best for the artist to have as much latitude under this clause as possible. For example, a better clause for the artist would be, “Tenant shall use and occupy the demised premises for an artist’s studio, residence, and gallery.”
But the artist who chooses to live illegally in a commercial space, perhaps even without the landlord’s knowledge, cannot expect the landlord to agree to a lease clause permitting use as a residence. At the least, however, the artist should not accept a use clause specifying that no living in the space will be permitted, such as “artist’s studio, no living.” Such a clause will place the artist clearly in breach of the lease and subject to eviction by the landlord, unless state or local laws provide special protections for tenants.
Zoning: Working in a Residential Zone
Zoning governs the way in which buildings may be used. The development of a city or town may be guided through the use of zoning laws to control the density of buildings and population as well as the nature of activities in different areas. For example, zoning restrictions may limit the type of materials that an artist can use and store in the premises. Inflammable and volatile solvents may be prohibited in certain buildings.
If an area is zoned for residential use, questions may be raised as to the legality of an art studio. Certainly an artist should be able to paint, draw, or take photographs without worrying about the reaction of neighbors. Technically, however, if this is done in the pursuit of business, the zoning ordinance may be violated. If the business involves a lot of traffic to and from the premises, it is more likely that such a violation will be brought to the attention of the zoning authorities.
For example, an artist conducted ceramics classes at home in an area that was zoned to allow an artist’s studio in a residence as long as the art use “is merely incidental to the primary residential use.” During weekdays up to fifteen children attended the classes, while a slightly smaller number of adults attended in the evenings. The court observed that:
If we were concerned with an occasional gathering of persons interested in the subject of ceramics who merely discussed their problems or experiences it may very well be that any zoning ordinance which prohibited such gatherings would be ruled invalid; but here we have a regular schedule of classes with many students in attendance.
Despite the fact that the students did not pay to attend the classes, the court upheld the zoning appeals board in its determination that the classes violated the zoning ordinance (Schweizer v. Board of Zoning Appeals, 8 Misc.2d 878, 167 N.Y.S.2d 764, 766).
Zoning ordinances and rulings vary from locality to locality. If the artist contemplates conducting a business in a residential space, he or she should find out whether or not a zoning ordinance forbids such business activity and what the penalties are if the zoning is violated. One likely penalty would be a court order to cease and desist from conducting the art business on the premises. To avoid this risk, the artist might prefer to seek appropriate administrative permission, usually obtained by a variance procedure, which would allow use of the premises for activities otherwise forbidden.
Zoning: Residing in a Commercial Zone
The reverse situation, residing in commercially zoned space, also arises, especially in cities. In New York City, for example, artists often took up residence in areas zoned for manufacturing in order to benefit from the good floor space and high ceilings of these industrial lofts. Recognition of these illegal tenancies brought a liberalization of the zoning laws which, starting in 1964, allowed people to reside and work in up to two spaces in nonresidential buildings that met certain maximum size and safety requirements if the spaces were registered with the Building Department.
Many artists resisted this registration process and continued living as illegal tenants. In Soho, where there was a concentration of illegal tenancies, the Soho Artists Association led the campaign that, in 1971, resulted in the creation of legal living zones in Soho, subject again to certain limitations such as maximum loft size. Artists must be certified as artists by the City’s Cultural Affairs Department. Once certification is obtained by the artist, the building in which the space is located has to conform to New York City’s Building Code and Multiple Dwelling Law in order for a certificate of occupancy to be issued by the Building Department. This process is often difficult and expensive.
In 1976, legal living zones were created in Noho and Tribeca. More recently, living was legalized in many other areas of the city. An artist facing a challenge over his or her status in a space in New York City may contact the Lower Manhattan Loft Tenants Association (page 254) for advice and referral to an attorney. Outside New York City it would be wise to contact a local attorney who is knowledgeable regarding real estate law.
Cooperative Buildings
Some artists may be offered the opportunity to purchase space in a cooperative or condominium that owns the building. In such a case, the determination by experts as to the adequacy of both the building and the space for the artist is even more important than in the usual rental situation. Sponsors sometimes lure potential purchasers by concealing the extent of repairs and renovations that will be necessary after the building becomes a cooperative. Once the repairs are completed, the maintenance costs—basically the carrying costs of the building, which each individual owner must bear—take an upward leap and make ownership of the space far less attractive than it originally appeared. In New York, the attorney general seeks to prevent frauds by requiring extensive disclosures in the selling prospectus. The artist should be particularly cautious when considering the purchase of space, and consultation with an attorney is a necessity.