Written for Southern California, where AIR CRE forms govern most commercial leases. Updated August 2026.
Turnover is the moment a commercial space changes hands, a tenant surrendering at the end of a term, or a landlord delivering to an incoming tenant. It is also where a surprising share of commercial lease disputes originate, almost always over the same handful of issues, and almost always because a deadline passed that nobody had calendared.
This checklist covers both directions.
This article is general information about standard lease forms and California statutes. It is not legal advice and does not create an attorney-client relationship. Form language varies between AIR CRE editions and negotiated riders routinely override the provisions discussed here, so have counsel review your specific lease before acting on any of it.
Start here: the 60-day window that decides who pays for restoration
If you read nothing else on this page, read this.
Under the AIR CRE standard forms, the landlord may require the tenant to remove Lessee Owned alterations and utility installations, meaning those the tenant made that have not already become the landlord’s property, by giving written notice not earlier than 90 days and not later than 30 days before the end of the term.
One qualification matters as much as the deadline. The 90-to-30-day window governs work the landlord consented to. Anything the tenant installed without the required consent can be ordered removed at any time, with no window at all. Trade fixtures sit outside the mechanism entirely: they remain the tenant’s property and must be removed regardless of any notice.
That is a 60-day window, and it cuts both ways:
- Landlords: serve that notice inside the window or you lose the contractual right to compel removal of consented work. On a large tenant improvement package, that is a six-figure decision made by a calendar reminder.
- Tenants: if you never received the notice, you have a strong argument that consented improvements stay and you owe nothing for restoration. That argument does not reach anything installed without landlord consent. Check your file before you budget for demolition.
Diary it at lease signing, not at lease expiration. By the time expiration is on the horizon, the window is usually closing.
What condition the space has to be in
The AIR CRE forms require the tenant to surrender the premises broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. That is the industrial and multi-tenant net wording; the office gross form says only “clean and free of debris,” without “broom.”
Two qualifications do most of the work in a dispute.
Deferred maintenance is not wear and tear
The form states that ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practice. This is where surrender claims are actually won and lost. A tenant who skipped HVAC servicing for four years cannot characterise the resulting condition as wear and tear, which is precisely why maintenance records matter at surrender.
Short leases get no wear and tear allowance at all
If the tenant occupied the premises for 12 months or less, the AIR form requires surrender in the same condition as delivered on the start date, with no allowance for ordinary wear and tear. Short-term and swing-space tenants routinely miss this.
One term of art worth flagging: broom clean has no statutory or code definition. It is a contract term whose content comes entirely from the lease and local custom. If the standard matters to you (laboratory, food service, heavy manufacturing) define it in the lease rather than argue about it later.
What you can take with you: trade fixtures vs. utility installations
| Category | Definition under the AIR form | Who gets it |
|---|---|---|
| Trade Fixtures | Lessee machinery and equipment that can be removed without doing material damage to the premises | Tenant property; tenant must remove and repair resulting damage |
| Utility Installations | Floor and window coverings, air and vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing | Tenant-owned but considered part of the premises, subject to the landlord removal election |
| Alterations | Any modification of the improvements other than Utility Installations or Trade Fixtures | Same as Utility Installations |
Read that middle row again. Cabling, lighting fixtures, supplemental HVAC and security systems are Utility Installations, not trade fixtures. Tenants routinely assume equipment they paid for and installed is theirs to remove. Under the AIR definitions it is tenant-owned but treated as part of the premises, and whether it comes out is the landlord call: made inside that 90-to-30-day window, or at any time if the work went in without consent. One form-specific note: this list tracks the industrial and multi-tenant net forms. The office gross form omits fencing from the definition, so check the form in front of you rather than the general rule.
The California statutory trap
California Civil Code section 1019 permits a tenant to remove things affixed for purposes of trade, manufacture, ornament or domestic use, but only at any time during the continuance of his term, only if removal can be effected without injury to the premises, and unless the thing has, by the manner in which it is affixed, become an integral part of the premises. That final clause is a separate limit from the injury test, and it is the one that most often defeats removal claims for HVAC, sprinklers and built-in plumbing.
The removal right is tied to the term, not to a grace period afterward. If fixtures are still in place when the landlord regains possession, they generally become the landlord property. Plan removal to finish before expiration, not on the last day.
Two practical caveats. The statutory right is routinely overridden by the lease itself: surrender and restoration clauses control, and a default clause forfeiting fixtures will be enforced (Goldie v. Bauchet Properties (1975) 15 Cal.3d 307). And property actually left behind at the end of a commercial tenancy is governed by Civil Code sections 1993 through 1993.09, which impose a notice-and-sale procedure on the landlord rather than letting it simply dispose of what remains.
Holdover: what staying an extra week costs
The AIR form is blunt. A tenant has no right to retain possession beyond expiration, and if it holds over, Base Rent increases to 150% of the Base Rent applicable immediately before expiration. The defined term does real work here: the multiplier attaches to Base Rent, not to Rent as defined in paragraph 4.1, which on a net lease also sweeps in operating expenses, taxes and insurance.
Check which generation of the form your lease is on. AIR CRE issued a 10/2020 revision that rewrote the holdover clause: damages are now measured by the full Rent due in the last full month before expiration, with only the Base Rent component grossed up to 150%. That revision also ties holdover to delivery of exclusive possession, which means a tenant who has moved out but has not returned the space in the condition the lease requires can still be held over.
Market holdover multipliers run from 150% to 200%. Negotiable positions include a short grace period at 100% to 125%, or a sliding scale: 110% in the first month, 125% in the second.
Here is a point specific to Southern California that most national guidance gets wrong: the AIR holdover clause contains no consequential damages, indemnity or hold-harmless language. Outside California, landlords commonly carve holdover out of consequential damages waivers, exposing a tenant to the incoming tenant lost rent, storage, relocation and expedited construction costs. In an AIR-form deal that exposure is a negotiated rider term, not a default. Check whether one was added before assuming either position.
Security deposits: the California rule almost everyone states incorrectly
There are two errors in wide circulation, and correcting only the first leaves you with the second.
Error one: applying Civil Code section 1950.5 to a commercial lease. It does not apply, section 1950.7 expressly provides that 1950.5 prevails for residential property only.
Error two, and the more damaging one: concluding that because 1950.5 does not apply, no statute does and commercial deposits are purely contractual. This is false, and it appears in commercial real estate commentary regularly.
California Civil Code section 1950.7 governs commercial security deposits. Its key provisions:
- No statutory cap on the deposit amount, unlike residential.
- Deductions are limited to amounts reasonably necessary to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, or to clean the premises on termination, and then only if the deposit was taken for those purposes. Absent an express waiver, anticipated future damages are not deductible: only rent accrued as of the return deadline.
- A 30-day return deadline, in no event later than 30 days from the date the landlord receives possession. The clock runs from receipt of possession, not from expiration and not from the day the tenant moved out.
- A two-week rule that is narrower than usually stated. It applies only where the landlord’s claim is solely for defaults in the payment of rent and the deposit exceeds one month’s rent plus a deposit amount clearly described as the last month’s rent. In that case the portion above one month’s rent comes back within two weeks and the remainder within 30 days. If the landlord also claims repair or cleaning costs, there is a flat 30 days and no two-week obligation at all.
- Priority, the tenant claim to the deposit ranks ahead of the landlord creditors, except a trustee in bankruptcy.
- Bad faith retention exposes the landlord to damages up to $200 in addition to actual damages.
But section 1950.7 can be waived by express lease language. The reason is structural: Civil Code section 1953, the anti-waiver statute, applies only to leases of a dwelling. It makes 1950.5 non-waivable, and the Legislature enacted no parallel bar for 1950.7. Read the scope of that authority carefully: it runs to the timing and application rules in subdivision (c). No California case holds that subdivision (b), which gives the tenant priority over the landlord’s creditors, can be waived.
Case law bears this out. In 250 L.L.C. v. PhotoPoint Corp. (USA) (2005) 131 Cal.App.4th 703, the court held that parties to a commercial lease may waive section 1950.7 so that a deposit can be applied against future rent damages, but found no such waiver in the lease before it. Without one, the landlord had to calculate damages only through the 30-day deadline and return the excess, regardless of anticipated future rent losses.
Two further points from that case matter in practice. Having wrongfully retained the deposit, the landlord was not permitted to offset it against its section 1951.2 damages. And on rehearing the court made clear that a clause merely extending the statutory return deadline is not a waiver: the waiver has to be express and has to address application against future damages.
- Tenants: look for a 1950.7 waiver in your lease. If there is one, the 30-day clock and the deduction limits may not protect you. If there is not, and your deposit is still held at day 31, you have a statutory argument.
- Landlords: if you intend to apply a deposit against future rent damages, you need the express waiver. Most institutional leases include one. Confirm yours does before you rely on it.
This section states a legal position and is not legal advice. Have counsel review your specific lease.
Checklist: tenant to landlord at surrender
The AIR forms do not require the tenant to hand over any documents at surrender. That silence is exactly why this should be a negotiated rider, and why so many surrender disputes are really documentation disputes.
- All keys, access cards, fobs and security devices, with a signed count
- Alarm codes and security system account transfer
- HVAC service contracts and full maintenance records. The AIR form already requires the tenant to maintain HVAC contracts with copies to the landlord during the term. Delivering the complete service history at surrender is the single best rebuttal to a deferred-maintenance claim
- Warranties on any tenant-installed equipment staying in place
- As-built drawings for tenant improvements remaining in the space
- Hazardous materials documentation and closure evidence where applicable
- Confirmation of utility account closure or transfer, with final meter readings
- Signed joint inspection report and a dated, comprehensive photo set
- Lien releases for any restoration or removal work performed
- Forwarding address for deposit return, the 30-day clock needs somewhere to send it
Checklist: landlord to tenant at delivery
- Certificate of occupancy or building department final sign-off. The AIR Work Letter defines completion by reference to building department final inspection authorization
- Written confirmation of the delivery and rent commencement dates. Rent does not commence until possession is delivered, and the tenant may cancel if possession is not delivered within 60 days after the commencement date
- Punch list, executed within 10 days. The AIR Work Letter requires the tenant to notify the landlord of incomplete items within 10 days following delivery of possession, or the work is deemed accepted. This is the hardest deadline in the whole turnover process and the easiest to miss
- Keys, access cards, parking credentials, building access enrollment
- Base building systems warranty documentation. The AIR delivery warranty runs six months for HVAC and 30 days for the remaining systems, measured from the Start Date, and it is conditioned on the tenant putting the paragraph 7.1(b) service contracts in place within 30 days of that date. Structural defects and legal-compliance defects run on their own separate clocks. Get the paperwork before any of them lapse
- Code compliance confirmation. Non-conformities must be raised within six months of the start date or they become the tenant obligation
- Base building as-builts and shell drawings for the tenant design team
- Building rules and regulations, and the approved contractor and vendor list
- Utility account establishment information
Delivery condition: what the labels actually mean
They mean whatever your work letter says they mean. As the American Bar Association Probate & Property has noted, these terms have no fixed definitions and vary by region, municipality and company, which is the argument for specifying delivery condition in detail rather than relying on a label.
- Cold dark shell, bare structure, no interior finishes, possibly no electrical or plumbing connections
- Warm shell or grey shell, basic services present: ceilings, lighting, plumbing and HVAC connections; no interior finishes
- Vanilla box or white box, finished but unpainted drywall, subfloor, landlord-installed utilities
- Turnkey, the tenant arrives with equipment and opens
- As-is, what you see is what you get; no landlord improvement obligation
Printable turnover checklist
90 days before expiration
- Landlord: decide on restoration and serve the removal notice, the window closes at 30 days
- Tenant: confirm whether a removal notice has been received
- Both: re-read the surrender, restoration and holdover clauses together
- Tenant: confirm your lease term length, under 12 months means no wear and tear allowance
60 days before
- Schedule the joint walkthrough
- Tenant: scope and price restoration work; confirm contractor approval requirements
- Tenant: assemble HVAC and maintenance records
- Tenant: check the lease for a Civil Code section 1950.7 waiver
30 days before
- Begin restoration and trade fixture removal, the section 1019 removal right ends with the term
- Initiate utility transfers
- Photograph and video the space before work begins
At surrender
- Joint walkthrough with a signed, dated condition report
- Complete photo and video set
- Hand over the document package above
- Return all keys and access devices against a signed count
- Provide a forwarding address
After surrender
- Tenant: diary day 30 for the security deposit
- Landlord: complete deposit accounting within 30 days of receiving possession
- Both: retain the condition report and photographs for the limitations period
Frequently asked questions
What is a turnover package in a commercial lease?
It is the set of documents, keys, records and access credentials that change hands when a commercial space is surrendered by a tenant or delivered to a new one: typically keys and access devices, HVAC service records, warranties, as-built drawings for tenant improvements, utility account information, and a signed condition report. Standard AIR CRE lease forms do not require any of this at surrender, so it should be addressed by rider.
What condition must a commercial tenant leave the space in?
Under the AIR CRE forms, broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. Ordinary wear and tear expressly excludes damage or deterioration that good maintenance practice would have prevented. Tenants who occupied for 12 months or less get no wear and tear allowance at all.
When must a landlord tell a tenant to remove improvements?
Under the AIR CRE forms, by written notice given not earlier than 90 days and not later than 30 days before the end of the term. A landlord who misses that 60-day window loses the contractual right to require removal of work it consented to. The window does not apply to alterations or utility installations made without the required consent, which the landlord may order removed at any time, nor to trade fixtures, which the tenant must remove in any event.
Can a tenant remove fixtures at the end of a commercial lease in California?
Trade fixtures, machinery and equipment removable without material damage, remain the tenant property and must be removed, with the tenant repairing resulting damage. California Civil Code section 1019 permits removal only during the continuance of the term, only where it can be done without injury to the premises, and not where the item has become an integral part of the premises. Items left in place when the landlord regains possession generally become the landlord property, subject to the notice-and-sale procedure in Civil Code sections 1993 through 1993.09. Cabling, lighting, supplemental HVAC and security systems are classified as Utility Installations under the AIR forms, not trade fixtures.
How long does a landlord have to return a commercial security deposit in California?
California Civil Code section 1950.7 sets 30 days from the date the landlord receives possession. A narrower two-week rule applies only where the landlord’s claim is solely for unpaid rent and the deposit exceeds one month’s rent plus a separately designated last month’s rent deposit; in that case the portion above one month’s rent comes back within two weeks. Deductions are limited to unpaid rent, tenant-caused damage to the premises and cleaning, and do not extend to anticipated future damages absent an express waiver. Unlike the residential statute, section 1950.7 can be waived by express lease language, because the anti-waiver statute at section 1953 covers only dwellings.
What is holdover rent in a commercial lease?
Rent charged at a premium when a tenant stays past expiration. The AIR CRE forms set it at 150% of the base rent applicable immediately before expiration; the market range is 150% to 200%. The AIR holdover clause contains no consequential damages language, so exposure to an incoming tenant losses is a negotiated rider term rather than a default in Southern California.
How long does a tenant have to submit a punch list?
Under the AIR CRE Work Letter, 10 days following delivery of possession. After that the work is deemed accepted. This is the tightest deadline in the turnover process, walk the space and document incomplete items on the day you receive keys.
Handling a lease expiration or a new delivery?
Most turnover disputes are calendar problems, not legal ones. The restoration notice window, the punch list window, the deposit clock and the fixture removal right all run on deadlines that are easy to miss and expensive to lose.
KEYZ Commercial represents landlords and tenants across Southern California on lease expirations, renewals and new deliveries. Browse current listings or contact our team.
Sources
- AIR CRE, Standard Industrial/Commercial Single-Tenant Lease, Net (Form STN-27.10, revised 11-01-2017) and Multi-Tenant Lease, Net, paragraphs 2.2, 2.3, 3.3, 7.1(b), 7.3(a), 7.4(b), 7.4(c) and 26. AIR CRE issued a 10/2020 revision of these forms that materially rewrote paragraph 26; confirm which generation your lease is on
- AIR CRE, Work Letter (Form WL-2.00, revised 01-03-2017; also superseded by a 10/2020 revision), sections 5 and 11
- California Civil Code sections 1019, 1950.7, 1953 and 1993 through 1993.09
- 250 L.L.C. v. PhotoPoint Corp. (USA) (2005) 131 Cal.App.4th 703, as modified on denial of rehearing (2005) 132 Cal.App.4th 194e
- Goldie v. Bauchet Properties (1975) 15 Cal.3d 307
- Kimball, Tirey & St. John LLP, Commercial Tenant Improvements: Who Owns What?, March 2015; The Commercial Security Deposit: Do’s and Don’ts, July 2009
- Schorr Law, The California Civil Code Section 1950.7 Waiver, updated July 2022
- Hollander Real Estate Law, Tenant Surrender Obligations in Commercial Leases and Holdover Provisions in Commercial Leases, August 2024
- Stephen Liss, The Last Word: Being Constructive About Construction Terms, Probate & Property, American Bar Association