Leasing a data center is a strategic decision that comes with unique challenges. Here are some of the critical issues you should be aware of before signing a data center lease.
1. Security and Access
Data centers house critical infrastructure, making security a top priority. Here are some considerations:
- Access Rights: Data center tenants should restrict landlords’ access. Negotiate entry terms and notice periods with your clients in mind.
- Secured Areas: Require restricted zones to protect proprietary information.
- Tenant Default Provisions: Extensive negotiations are necessary to address default scenarios to ensure you and your clients are not paralyzed in a default scenario.
2. Maintenance Responsibilities
Data center tenants often bear significant maintenance responsibilities:
- Equipment Maintenance: Tenants are generally responsible for maintaining and repairing their equipment.
- Floor Capacity: Landlords must ensure that tenant equipment doesn’t overload floor capacity.
- Alterations and Installations: Determine necessary alterations and installations before signing the lease.
- Cooling and Humidity Control: Facilities often require robust cooling infrastructure such as large-scale air conditioning units, heat exchangers, condensers, and sophisticated pump systems. Mandate your landlord adhere to standards set forth by organizations like the American Society of Heating, Refrigerating and Air-Conditioning Engineers.
3. Utilities and Uninterrupted Services
Data centers require uninterrupted utility services. Consider the following:
- Utility Services: Ensure continuous power, cooling, and connectivity.
- Redundancies: Commonly used redundancy frameworks include (A) the “tier” system, which ranges from one to four, indicating varying levels of redundancy, and (B) the “series of nines” system in which higher numbers signify greater reliability in uptime percentages. Three nines (99.9%) indicates less reliability compared to five nines (99.999%).
- Cross Connections: Lessees should negotiate for the right to establish the maximum number of circuits and cross-connects throughout the data center (including within their leased space) without incurring additional costs. Also, pay attention to any restrictions regarding which carriers are permitted into the facility.
- Generators: If not already present, negotiate for the greatest number of backup generators.
- Billing: Separate metering will protect you from unnecessary fees.
- Landlord Interference: Strong language prevents landlords from disrupting utility services.
- Due Diligence: ask for copies of the data center’s power purchase agreements.
Data center leasing is both an art and a science. Make sure you are working with real estate brokers, attorneys, and all ither service providers who understand the issues.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. In particular, he has a significant amount of experience in hospitality law by representing third party management companies, owners, and developers.
He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
Photo provided by: The Times of Israel; Israel pushes ahead with tender for massive cloud-based data center | The Times of Israel
