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Insight article

September 16, 2019

Ready, steady, fit-out!

Retail and corporate tenants taking a lease of new or older premises will typically have fit-out works to carry out to get their new premises ready for occupation.

Each tenant will have its corporate colours, style, and requirements that must be incorporated. If the landlord hands over premises in shell condition with capped-off services, there may be less for a tenant to do than when it takes over previously occupied premises. Previously occupied premises must often be stripped out first and require enabling works (fit-out works).

Once solicitors are instructed and the documentation is progressing, a tenant should not take its foot off the gas. There may be a survey to arrange, marketing to be done, architects to instruct, and possibly planning permission and other consents to be applied for before completion of the new lease.

One of the many tasks facing a tenant that can easily slip during the lease process is finalising any fit-out requirements and having a specification and plans drawn up ready for the landlord to approve.

A landlord wants the lease completed as soon as possible, with any rent-free period starting as soon as possible. A tenant, on the other hand, wants the rent-free period to begin only when its works have been approved and it is free to carry them out.

Transactions stall when the lease is ready to be completed, but tenant works are lagging behind and still await approval from the landlord.

Whilst there are workarounds that solicitors can document (if both parties agree), this is not ideal because it generally involves the tenant, or sometimes the landlord, who bears an element of risk.

A well-advised tenant will finalise their fit-out requirements and submit them to the landlord for approval as soon as possible.

Contact commercial real estate partner John Gillette today for more information on commercial landlord and tenant matters.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

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