Is ADA Really Just the Tenant’s Problem?

Marc Perlof • September 6, 2026

By Marc Perlof | @MarcRetailGuy
CA #01489206


September 7, 2026


If you own retail real estate, here’s what just changed for you.


Why ADA Risk Matters

Americans with Disabilities Act (ADA) risk can affect a retail property owner even when the tenant operates the business. For California retail properties, accessibility issues can lead to lawsuits, settlements, Certified Access Specialist  (CASp) reports, repair obligations, lease disputes, buyer concerns, and lower property value if the risk is not managed.


The biggest issue is not always the cost of the repair. The bigger issue is uncertainty. Buyers, tenants, lenders, and attorneys may use unresolved ADA concerns to ask for credits, repairs, holdbacks, price reductions, or stronger lease protections.

For retail owners, the goal is simple: understand the risk before a lawsuit, tenant, buyer, or lender uses it against you.


Why ADA Risk Matters to Retail Property Owners

Most retail property owners do not think about ADA risk until something creates pressure. That may be a lawsuit, a tenant complaint, a buyer question during due diligence, a lender request, a CASp inspection, or a repair demand. By that point, the owner is usually reacting instead of controlling the issue.


This matters because ADA risk is not only a legal issue. It is also an ownership, leasing, and value issue. A retail owner may face legal costs, settlement costs, repair costs, tenant conflict, delayed closings, buyer discounts, or disclosure concerns.


This year, I saw ADA issues come up on separate retail properties. Once the claims surfaced, the owners had to deal with attorneys, settlement discussions, CASp reports, and property updates. That is when ADA risk stopped being theoretical. It became a real ownership issue with real costs, real deadlines, and real value impact.


The mistake many owners make is assuming the tenant is responsible for everything. That may or may not be true. The lease matters. The property condition matters. The location of the issue matters. The type of tenant matters. The owner’s control over common areas matters. The history of prior improvements also matters.


In other words, ADA risk is not always simple.


What ADA Risk Looks Like in a Retail Property

Retail properties are exposed because customers use the property in many ways. They park, walk to the business, enter the space, move through the property, use restrooms, approach counters, and sit in dining or waiting areas.


Accessibility issues may involve parking stalls, access aisles, paths of travel, ramps, sidewalks, entrances, doors, restrooms, service counters, signage, slopes, seating areas, or common areas.


Some issues may be inside the tenant’s premises. Other issues may be in areas controlled by the landlord. Some may involve shared areas used by multiple tenants. Some may have existed for years without a complaint. That does not always mean the issue goes away.


For owners, the practical questions are:

  • What accessibility issues exist?
  • Who controls the area?
  • Who is responsible under the lease?
  • What can reasonably be corrected?
  • What is the cost?
  • How could this affect value?

These are ownership questions, not just legal questions.


Is ADA the Tenant’s Responsibility or the Landlord’s Responsibility?

This is one of the biggest questions retail owners ask. The honest answer is: it depends.

A tenant may be responsible for its own operations, furniture layout, fixtures, counters, interior improvements, and customer service areas. But a landlord may still have exposure, especially if the issue involves the property itself or common areas controlled by the owner. This is why the lease matters.


A strong lease should address compliance, maintenance, repairs, alterations, tenant improvements, common areas, indemnity, and legal claims. But even a strong lease may not stop a claim from being made against the owner. The lease may help determine who pays, but it may not prevent the owner from being pulled into the issue. The tenant may operate the business, but the owner still owns the property.


How ADA Risk Can Affect Retail Property Value

ADA risk affects value because buyers do not only underwrite income. They also underwrite risk. A buyer looking at a retail property may ask whether there have been ADA lawsuits, settlements, CASp reports, unresolved repairs, tenant complaints, or prior accessibility claims. They may also ask whether the property has accessible parking, a clear path of travel, proper signage, accessible entrances, and restrooms that fit the tenant use.


If the answers are unclear, the buyer may price in uncertainty. That can reduce value. The repair cost may be manageable. The uncertainty may not be. A buyer may not know whether the issue costs $10,000, $50,000, or $150,000. When buyers do not know the number, they often assume a larger number to protect themselves. That is how a repair issue becomes a pricing issue.


A buyer may ask for a price reduction, repair credit, escrow holdback, longer due diligence period, legal review, updated reports, or stronger seller representations. In some cases, the buyer may use the issue to renegotiate the deal. In other cases, the buyer may decide the risk is not worth it. This is the “so what” for the property owner. Unmanaged ADA risk can reduce leverage. Reduced leverage can reduce value.


How ADA Risk Can Affect Leasing

ADA issues can also affect leasing. A new tenant may require accessibility improvements before opening. A franchise tenant may have stricter standards. A restaurant may care about parking, seating, restrooms, service counters, and path of travel. A medical or dental tenant may care even more because patients may include older customers or people with mobility limitations.


If the property has unresolved accessibility issues, the tenant may ask for landlord work, tenant improvement money, free rent, rent reductions, a longer due diligence period, or lease protections. The owner may still complete the lease. But the deal may become more expensive. That affects Net Operating Income (NOI). If NOI is reduced, value may be reduced.


What Retail Property Owners Should Do

Retail owners should not panic. They should get organized. 

  1. Review the areas customers actually use. This may include parking, access aisles, paths of travel, entrances, doors, ramps, restrooms, counters, signage, and common areas.
  2. Review the lease. The owner should understand who is responsible for compliance, repairs, common areas, tenant improvements, legal claims, and indemnity.
  3. Consider whether a CASp inspection makes sense. This may be especially important before a sale, refinance, major lease negotiation, tenant turnover, or if there are obvious access issues at the property.
  4. Get proper legal and accessibility guidance. ADA and California accessibility claims can be technical. Owners should not rely only on guesses, tenant comments, broker opinions, or internet searches.
  5. Think about value. The question is not only, “What will this cost to fix?” The better question is, “What could this cost if it shows up during a lawsuit, lease negotiation, refinance, or sale?”


Being proactive is smart, but it should be done carefully. Owners should not rush into inspections, written statements, or repairs without first speaking with an ADA attorney and a qualified accessibility professional. The goal is not to create a report with no action plan. The goal is to understand the risk and make controlled decisions.


Final Thought

ADA risk is not just a tenant problem. It can affect the owner, the lease, the tenant relationship, the buyer pool, the sale process, and the value of the asset. For retail property owners, the goal is not fear. The goal is control. If the owner understands the issue early, the owner can plan, budget, negotiate, repair, disclose, or address the risk before someone else uses it as leverage.


If you own a retail property with public access, I can help you review how ADA risk may affect leasing, buyer questions, and future sale value before it becomes a negotiation problem.


In the next week’s blog, “CASp Reports and Retail Property Value: What California Owners Should Know,” we will discuss what a CASp report can reveal, why timing matters, and how knowing the issues early can help protect a retail property owner’s leverage.


Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide.


#RetailRealEstate #CommercialRealEstate #CaliforniaRealEstate #RetailPropertyOwners
#ADACompliance #CASp #PropertyValue #CommercialProperty #MarcRetailGuy




Disclaimer

This post is for information only. It is not legal, tax, or financial advice. Always check with a licensed professional before making decisions.




© 2026 Marc Perlof Group. All rights reserved.

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • September 4, 2026
Global bond yields fall after Fed governor says he may back holding rates steady Bond yields around the world fell Thursday, after Federal Reserve board of governors member Christopher Waller said he would support holding interest rates steady if economic conditions warrant it. “If there is continued progress toward our 2 percent goal, then I am willing to support holding the policy rate at its current level,” Waller said Thursday at the Reuters NEXT Newsmaker event in Washington, D.C...

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • August 28, 2026
Fed’s preferred inflation gauge shows core prices rose 3.3% annually in July Prices consumers pay for a variety of goods and services rose slightly in July, according to the Federal Reserve’s main inflation gauge.  The personal consumption expenditures price index, which the Fed uses as its preferred forecasting tool, increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 3.7%, the Commerce Department reported Wednesday. Both were 0.1 percentage point above the Dow Jones consensus...

How Tenant Improvement (TI) Decisions Affect Retail Property Value and Buyer Underwriting

By Marc Perlof • August 24, 2026
By Marc Perlof | MarcRetailGuy CA #01489206 August 17, 2026 If you own retail real estate, here’s what just changed for you. A tenant asks for a $100,000 tenant improvement allowance. The landlord thinks the request is unreasonable. The tenant thinks it is necessary to open the business. Who is right? Possibly both. The problem is that landlords and tenants often look at tenant improvement allowances, commonly called TI, from different points of view. The tenant sees money needed to build and open the business. The landlord sees money being invested into a property and a lease. Both sides may be looking at the same $100,000 but thinking about it very differently. The TI amount matters, but it should not be negotiated by itself. Rent, lease term, annual increases, free rent, tenant strength, guaranties, options, and TI are all connected. The real question for an owner is not simply, “How much TI am I giving?” It is, “What am I receiving in return?” The Tenant Sees the Cost of Opening Opening a retail business can require a large investment before the first customer walks through the door. Depending on the business and condition of the space, the tenant may need to pay for construction, equipment, signs, permits, inventory, employees, and marketing. From the tenant’s point of view, the TI allowance helps reduce the cash needed to open. That is why the tenant may focus heavily on the TI amount. The landlord, however, has a different concern. The Landlord Is Investing Capital For the landlord, TI is real money going into the lease. The owner should ask what the property receives in return for that investment. Is the tenant signing a longer lease? Is the rent strong? Are there annual increases? Is the tenant financially strong? Is there a guaranty? Will the improvements have value if the tenant leaves? The same $100,000 TI allowance can create very different risks. A $100,000 investment into a strong tenant signing a long term lease may make financial sense. The same investment into a tenant with limited financial strength, a weak guaranty, and improvements with little value to the next tenant may be much riskier. The amount is the same. The investment is not. TI, Rent, and Free Rent Are Connected A lease negotiation often includes several economic items. A tenant may ask for TI, lower rent, free rent, or some combination of all three. An owner should look at the total package because each option affects the property differently. TI requires capital upfront. Free rent delays cash flow. Lower rent can reduce NOI throughout the lease and may affect the property’s value. This does not mean one structure is always better. The answer depends on the lease term, rent increases, tenant strength, cost of construction, cost of vacancy, and the owner’s available capital. The mistake is negotiating each item as if it has nothing to do with the others. A Simple Example Assume a tenant is negotiating a 10 year lease and offers the landlord two choices: Option 1: $100,000 in TI with $10,000 per month in starting base rent. Option 2: No TI with $9,000 per month in starting base rent. At first, Option 2 may look better because the landlord keeps the $100,000. But the $1,000 monthly rent difference equals $12,000 per year. Before considering rent increases or other lease terms, the lower starting rent creates $120,000 less base rent over 10 years. There is another issue. Lower NOI may also affect the property’s value when a buyer underwrites the income. This does not automatically make Option 1 the better deal. The owner still needs to consider the timing of the $100,000 investment, the tenant’s financial strength, default risk, rent increases, the value of the improvements, and whether the owner has the cash available. The point is simple: saving money on TI does not automatically create the better financial result. Free Rent Is Also Part of the Investment Free rent can also be misunderstood. A tenant may view free rent as time to complete construction, hire employees, stock inventory, and open the business before paying full rent. For the landlord, it is income that is not being collected. Assume the monthly base rent is $10,000 and the tenant receives four months of free base rent. That is $40,000 in base rent the landlord does not collect. Depending on the lease, the tenant may still pay NNN expenses during the free rent period, or those expenses may also be reduced or delayed. The details matter. An owner who gives $100,000 in TI and $40,000 in free rent is making a larger investment than the TI number alone suggests. Leasing commissions, landlord work, and other concessions can increase the total investment further. This does not mean free rent is bad. It means the owner should measure the full cost of the lease package. More TI Should Be Supported by the Lease If an owner is being asked to invest more capital, the rest of the lease should support that investment. That may mean a longer lease term, stronger rent, annual increases, better security, a stronger guaranty, or other terms that reduce risk. If the tenant wants more TI, more free rent, lower rent, limited guaranties, and flexible options, the owner should ask whether the total package still makes financial sense. Occupancy alone does not make a lease a good investment. A Simple Payback Test One useful screening test is how long it takes the owner to recover the total lease investment. That should include TI, free rent, leasing commissions, landlord work, and other concessions. As a rough guide, an owner may want the total lease investment recovered within the first 25% to 40% of the firm lease term. On a 5 year lease, that usually means about 1 ½ to 2 years. On a 10 year lease, that may mean about 2 ½ to 4 years. This is not a perfect rule, but it is a useful warning sign. If most of the lease term is needed just to recover the upfront investment, the owner may be taking too much risk. Look at the Whole Deal The highest rent does not always create the best deal. A tenant offering higher rent may require more TI, more free rent, a larger leasing commission, or more landlord work. Another tenant may offer slightly lower rent but require much less capital and have stronger financials. That is why lease negotiations should be viewed as one investment decision, not a collection of separate deal points. Final Thought Landlords and tenants often misunderstand TI allowances because they are looking at the same money from different sides. The tenant is trying to reduce the cash needed to open. The landlord is deciding how much capital to invest and what income, security, and long-term value will be received in return. Before agreeing to or rejecting a TI request, owners should ask one question: What is the total investment I am making, and what am I receiving in return? If a tenant offered you a choice between higher TI and higher rent or no TI and lower rent, would you know which deal creates the better result for your property? In next week’s blog, How TI Decisions Affect Retail Property Value and Buyer Underwriting , we will look at how buyers review tenant strength, remaining lease term, future TI costs, lease rollover, and the durability of a property’s NOI. #RetailRealEstate #CommercialRealEstate #RetailLeasing #TenantImprovements #TIAllowance #CommercialLeasing #MarcRetailGuy Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide.
More Posts