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Fit-Outs in Leases (Part 1): The Fundamentals of Fit-Outs and Leases
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Key Insights
Fit-out planning should happen early. Tenants and landlords should not leave fit-out issues until after the lease is signed. Intended works, approval requirements, rent treatment and cost responsibility should be considered early so the lease reflects what is needed for the premises to be used as intended.
Approvals and due diligence can affect the tenancy. Premises due diligence, planning restrictions and approval processes can all influence whether proposed fit-out works are practical. If those issues are not checked upfront, the parties may face problems that should have been addressed before works began.
Make-good obligations should be understood before the fit-out starts. Make-good is often treated as an end-of-lease issue, but it should be considered at the beginning. The lease should clearly deal with what happens to the fit-out when the tenancy ends, including what must be removed, reinstated or left behind.
A fit-out is often where a lease moves from a legal document to a practical project.
For tenants and landlords, fit-out works can affect timing, cost, approvals, rent arrangements, make-good obligations and the overall landlord-tenant relationship. Planning those issues early can help both sides understand the intended works, the approval process and the lease terms that will apply.
In Part 1 of this Explain That series on Fit-Outs in Leases: Practical Insights, Andrew Henshaw is joined by Joel Garrett to discuss the fundamentals of fit-outs in commercial leases and why clear lease terms matter before works begin.
The discussion covers:
- why tenants and landlords should take time to plan intended fit-out works;
- premises due diligence before committing to a lease;
- planning restrictions that may affect the proposed works;
- approval processes for fit-out works;
- rental abatements and how they may be dealt with during the fit-out period;
- fit-out contributions and who is responsible for funding works;
- make-good requirements at the end of the lease;
- negotiating lease terms that work for both tenants and landlords; and
- the importance of clear, well-drafted agreements in supporting a smooth tenancy and landlord-tenant relationship.
This first episode lays the foundation for the series by explaining the financial and legal issues that can arise when fit-out works are not properly planned or documented.
A practical discussion for landlords, tenants, business owners and advisers dealing with commercial leases, fit-out works, premises approvals or make-good requirements.
For advice on commercial leases, fit-out terms, rental abatements, fit-out contributions or make-good requirements, contact Velocity Legal.
This podcast in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this podcast.
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