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Signing a Contract

Tech/Data Center Law

Licensing & Leasing Options

Ensuring the Most Favorable Contractual Terms for Our Data Center Clients  

Data centers and colocation facilities, as both real estate entities and IT environments, have presented a strange contradiction for decades now. Contracts that deal with such arrangements don’t fit into a single category. In general, the legal documents that support data center transactions have many unique issues and concerns.

Real estate leases have universally been used for what are traditionally called "wholesale" data center transactions, which are the larger variety (where the tenant will be using roughly 300+kW of power and will have its own demised space).  Alternately, where the data center evolved from a computer data hosting foundation, clients now can locate their own client-owned servers and equipment. Typically, these data center operators grant licenses, rather than leases, under master services agreement with related service orders.

As a data center operator, determining the proper type of document that will be used there are several factors that should be considered.  Lease tenants have some rights that are substantially heightened compared to those that hold only a license, so utilizing a lease document can result in statutory process requirements that may need to be satisfied in order to remove a tenant or terminate a lease.  Similarly, a lease tenant may also have additional rights in the event that they hold over.  On the other hand, an operator will likely need to utilize a master services agreement and service orders to effectively describe the services to be provided to a customer. The parties agree to the macro issues in the MSA and then document the specific business terms for each individual data center deployment.

With such significant issues, it is important to ensure a thorough assessment of the options and determine the proper contractual course for each facility.  With our input and advice, we can ensure that these considerations are fully and successfully addressed.

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