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Commercial and Retail Property – What Are Santa Rosa Tenant Improvements in Leasing Premises?



When you lease or manage commercial or retail property the matter of Sonoma tenant improvements will be a component of the lease negotiation. The tenant will want to shape the property for their intended business operation. The lease negotiator and the property manager should handle the fitout approval process within the guidelines of investment set by the landlord.

So exactly what are tenant improvements? Here is a standard list of some of the main ones:

  • Walls and partitions to suit the tenant layout and business operation
  • Floor coverings of any special nature for occupancy
  • Communications systems and cabling
  • Furnishings both fixed and loose
  • Special air conditioning beyond base building
  • Security systems in the tenancy and property
  • Special lighting beyond base building
  • Signage on the tenancy and the property
  • Special Sonoma plumbing systems for kitchens, wash rooms, toilets and executive offices

There may be more to add to this list depending on the base building layout and property type. Retail property can be the most complex on matters of fitout design and approval; office and industrial property are more straightforward.

Base Building

Essentially the landlord provides the base building and the tenant supplies and installs their fitout into it. Base building plans (as built drawings) become central to the new fitout design and approval process.

Importantly each lease should contain specific clauses to obligate the tenant to remove their installed fitout and tenant improvements prior to lease expiry. That is called a ‘make good’ clause and will have great importance to the end of the lease. The clause should specifically handle the installed fitout and how it is to be removed from the premises at lease end.

Any ‘make good’ obligations should have been completed prior to lease expiry (no exceptions). As a part of this process, all tenants’ fitout matters should be well documented.

Existing Fitout?

So what happens if the landlord is providing a tenancy space that has existing fitout? In that case the landlord may own the fitout, but what is the future of it and how does the landlord want to handle it with any new tenant? The end of the lease will be highly relevant here.

Some decisions need to be made as to what happens to that fitout at the end of the lease. Will the landlord want the fitout to remain or will they want it removed? The make good clause should reflect that decision.

Will the landlord want the fitout to be renovated prior to the end of the lease? This is quite a relevant question if the tenant is in occupancy for a reasonable period of time (say 5 years).

This problem of an existing fitout occurs commonly where another tenant has left the premises and the landlord has consequently accepted or assumed ownership of the fitout. In some situations the existing fitout may be of attraction to the re-letting process. If however the fitout is highly specialised (such as a call centre or despatch centre) then the fitout may be of little use given the specialised tenant that would use it.

Approvals Please!

Every fitout to be implemented in a property or in a lease situation should be approved by the landlord first and foremost, and then be submitted to the local building and or planning office for the relative approvals. If any fitout is installed in the property and it does not comply with the building and safety codes then the landlord and the tenant have problems of risk and liability. The insurance for the property will likely be voidable.

It should also be said that the construction of the fitout should comply in every way with the approved plans and drawings. As part of that process it is likely that the property manager or the building engineer will need to oversee the final fitout construction outcomes. If the property is the subject of a large fitout construction for the tenant, then fitout works will need to be project managed with the appropriate specialists overseeing the matter for the landlord.

Article Source: http://EzineArticles.com/6714086

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