Who replaces the water heater in a leased commercial space?

Arizona's Residential Landlord and Tenant Act has a section on the landlord's duty to maintain the premises. It says the landlord shall "maintain in good and safe working order and condition all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities and appliances" that the landlord supplies. It also requires the landlord to "supply running water and reasonable amounts of hot water at all times." That is a strong rule for a home.

But that section is written for a "dwelling unit." The act's definitions say a dwelling unit "means a structure or the part of a structure that is used as a home, residence, or sleeping place." The duty attaches to the "premises," which the act defines as "a dwelling unit and the structure of which it is a part." An office, shop or restaurant is not used as a home. We did not find a commercial version of the same duty in the sources we opened, so the lease is the main tool.

Commercial leases split costs in a few common ways. The Holland & Knight guide describes the main types. A triple net lease is "a lease where the landlord passes all expenses incurred by the landlord in connection with operating the property through to the tenant." A gross lease "incorporates additional rent costs (e.g., operating expenses, taxes, insurance, maintenance costs) into a fixed monthly fee." A double net lease is one "in which a tenant pays property taxes and insurance in addition to base rent, while the landlord carries the maintenance obligation of the premises."

That helps, but it does not answer the water heater question by itself. Two points matter. The first is a Holland & Knight review tip, which says "under an NNN lease, the landlord may still be required to repair major structural defects and/or be responsible for capital expenditures above a certain threshold." A new water heater can be treated as a capital expense. The second is our own advice, not the firm's: a lease can treat repair and replacement differently, so read the wording of both. A tenant may pay for a repair, while a full replacement falls to the landlord if it costs more than a set amount.

### The clauses to find

Look in your lease for these, in roughly this order:

1. 1Maintenance and repair. Does the tenant maintain the systems that serve the space? Is the water heater named?
2. 2Replacement or capital items. Is there a dollar threshold? Is the cost spread over the useful life and passed through to the tenant?
3. 3Equipment and fixtures. Who owns the heater? A heater the landlord installed usually stays with the building. One the tenant installed may be the tenant's to remove or replace.
4. 4Landlord consent. Does the tenant need written approval before replacing or altering building systems?
5. 5Condition at move-in and move-out. Was the heater listed in a move-in inspection? Does the lease require it be returned in working order?
6. 6Common systems. If one heater serves several suites, who runs it and how is the cost shared?

Our page on commercial plumbing repairs: tenant or landlord covers the wider split, and commercial tenant improvement plumbing covers what to expect when a space is built out.

Most fights are not about the lease type. They come from a gap between two clauses. A few patterns are worth checking before a heater fails:

• Repair versus replace. A lease may make the tenant responsible for repairs but say nothing about replacement. The Holland & Knight tip about capital expenditures shows why a replacement can land on the landlord even under a net lease. Read the wording of both.
• Who installed it. If the tenant installed the heater during a build-out, the lease may treat it as the tenant's equipment. If it came with the space, it usually stays with the building.
• Age. A heater at the end of its life is a stronger case for replacement than for repair. A plumber's written report on age, condition and repair cost helps both sides.
• Shared service. When one heater serves several suites, the cost may be split through common area charges. Ask how, and what happens if one tenant needs a larger unit.
• Silence. If the lease never mentions the heater, do not assume either side owns it. Ask for a written agreement before work starts, so a later audit of operating expenses does not reopen the question.

There is a plumbing rule that can override the landlord's setup for a food business. Maricopa County's guide says each establishment "shall have its own properly sized dedicated hot water supply source." A "shared facility" that shares food preparation, storage or warewashing with three or more permittees under different ownership may be approved for a single heater. So a restaurant in a strip center cannot count on the landlord's shared heater by default. If the space came with no dedicated heater, the lease and the plans need to say who provides one. Our page on how the county sizes a restaurant water heater shows the size the county expects.

The guide also says a plan review permit "may not be required to replace an existing water heater if it is of the same capacity or larger and work is done in accordance with the manufacturer's specifications and local codes." It adds that all water heaters "require final on-site installation approval." Our page on permits to replace a water heater in Phoenix covers the city side.

Do these steps in order, and keep everything in writing.

1. 1Read the lease for the clauses above, and check any amendments.
2. 2Get a plumber's diagnosis. Our page on whether to repair or replace a water heater gives the questions to ask. A written report from a licensed plumber helps show that a heater has failed.
3. 3Notify the landlord in writing. Follow the lease's notice method. Include the diagnosis, a quote and your requested response time.
4. 4Ask for written approval of the plan and who will pay before ordering anything.
5. 5Confirm the permit path with the plumber before work starts.
6. 6Keep records. Save the invoice, the permit and the data plate details in case the lease treats the cost as a shared expense later.

If the heater has failed and the business cannot operate without hot water, tell the landlord about the urgency in the same notice. Do not assume that fixing it yourself keeps your right to be repaid. The lease may say otherwise.

HQ Plumbing & Air is licensed and insured, and can diagnose the heater, give a written quote and tell you what the county or city will want to see. We offer free estimates and upfront pricing.