{"id":3628,"date":"2019-10-08T16:35:53","date_gmt":"2019-10-08T20:35:53","guid":{"rendered":"https:\/\/www.gascon.ca\/2019\/10\/08\/review-of-key-legal-issues-regarding-data-centers-and-the-execution-of-a-colocation-agreement\/"},"modified":"2019-10-09T10:12:08","modified_gmt":"2019-10-09T14:12:08","slug":"review-of-key-legal-issues-regarding-data-centers-and-the-execution-of-a-colocation-agreement","status":"publish","type":"post","link":"https:\/\/gasc.sltm.ca\/en\/2019\/10\/08\/review-of-key-legal-issues-regarding-data-centers-and-the-execution-of-a-colocation-agreement\/","title":{"rendered":"REVIEW OF KEY LEGAL ISSUES REGARDING DATA CENTERS AND THE EXECUTION OF A COLOCATION AGREEMENT"},"content":{"rendered":"\n<p>Data processing and the ensuing need for efficient and secure storage solutions are at the center of most organizations\u2019 business and as a result, the presence of data centers is expected to increase considerably in the coming years.<\/p>\n\n<p>Clients generally use data center services in any of the following manners: i) by concluding a turnkey agreement with an experienced data center provider who will manage all of the client\u2019s operations, ii) by leasing an exclusive data center space or iii) by entering into a wholesale agreement with a data center provider.<\/p>\n\n<p>These transactions involve many considerations from a commercial and real estate perspective. This article outlines our analysis of the following:<\/p>\n\n<ul>\n<li>Is the provider a tenant?<\/li>\n<li>What are the client\u2019s rights in terms of use and modification of the co-located premises?<\/li>\n<li>Service outages and maintenance.<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\"><h3>A \u2014 Is the provider a tenant?<\/h3><\/h3>\n\n<p>A key preliminary question in the due diligence process is to confirm if the provider\u2019s activities are operated within its own property or within leased premises. <\/p>\n\n<p>If the provider leases its premises, several additional real estate considerations should be addressed, namely:<\/p>\n\n<ol>\n<li>Is the provider entitled to sublease or grant access to the leased premises under the terms of its lease?<\/li>\n<li>Is the term of the provider\u2019s lease at least equal to or longer than the term of the client\u2019s colocation agreement?<\/li>\n<li>Does the provider\u2019s lease provide for access to and use of a dedicated back-up and generator system for its leased premises?<\/li>\n<\/ol>\n\n<p>We strongly recommend that the client ensure that these elements are incorporated into the colocation agreement by way of representations and warranties from the provider.<\/p>\n\n<p>In addition, the client should negotiate the inclusion in the colocation agreement of a right to terminate the agreement should the provider fail to renew its lease or be placed in default thereunder. Moreover, the client should require that the provider forward a copy of any default notice received from its lessor and\/or a copy of the exercise by the provider of any lease renewal. <\/p>\n\n<p>Finally, in this context, the client should consider registering its sublease at the Land Registry. <\/p>\n\n<h3 class=\"wp-block-heading\"><h3>B \u2014 Client\u2019s rights in terms of modifications to and use of the premises<\/h3><\/h3>\n\n<p>Colocation agreements generally provide that the client is responsible for the maintenance and upgrade of its equipment located in the data center. <\/p>\n\n<p>As such, it is essential that the client has all the necessary rights of access to and use of the co-located premises enabling it to carry out its maintenance and upgrade requirements without the restrictions usually found in commercial leases.<\/p>\n\n<p>A standard commercial lease will usually provide that the tenant may not perform alterations or modifications without having first obtained the landlord\u2019s consent and may also impose weight and storage restrictions. We, therefore, recommend making sure that the colocation agreement contains provisions that authorize the intended use of the co-located premises by the client. It should, however, be noted that this use by the client must, in no way and at no time, interfere with the operations of the data center\u2019s other clients. <\/p>\n\n<h3 class=\"wp-block-heading\"><h3>C \u2014 Service outages and maintenance<\/h3><\/h3>\n\n<p>The uninterrupted use of the co-located premises is an essential consideration of the data center clientele. The power consumption of a data center is significant and must be supported by a back-up and generator system.<\/p>\n\n<p>In this respect, the fee payable by the client often takes into account its power usage during the term of the agreement. <\/p>\n\n<p>The usage requirements and warranties offered by the provider are detailed within a service level agreement (SLA) which is entered into concurrently with the colocation agreement. It is therefore essential that the client conduct an in-depth review of the terms and conditions of the SLA. The common practice is to cap the service credits available to the client in the event of an outage.<\/p>\n\n<p>The client must, therefore, confirm that the offered capped service credit is adequate to cover the damages it may incur as a result of an outage. The client should also determine if the nature of its business requires the negotiation of an additional remedy, such as a termination right.<\/p>\n\n<p>Finally, the SLA should detail the provider\u2019s maintenance obligations in relation to the data center, the back-up system, the generators, the common areas, and the cooling systems. Accordingly, the client should make sure that the SLA contains all of these provisions as well as any additional condition required for the client\u2019s business. For instance, in order to minimize its damages, does the client require a step-in right should the provider default in its maintenance obligations?<\/p>\n\n<p><strong><span style=\"color: #0179c9;\">By Audrey Robitaille<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Data processing and the ensuing need for efficient and secure storage solutions are at the center of most organizations\u2019 business and as a result, the presence of data centers is expected to increase considerably in the coming years. Clients generally use data center services in any of the following manners: i) by concluding a turnkey [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":1570,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[73,35,37,36],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>REVIEW OF KEY LEGAL ISSUES REGARDING DATA CENTERS AND THE EXECUTION OF A COLOCATION AGREEMENT - Gascon<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"REVIEW OF KEY LEGAL ISSUES REGARDING DATA CENTERS AND THE EXECUTION OF A COLOCATION AGREEMENT - Gascon\" \/>\n<meta property=\"og:description\" content=\"Data processing and the ensuing need for efficient and secure storage solutions are at the center of most organizations\u2019 business and as a result, the presence of data centers is expected to increase considerably in the coming years. 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