In this webinar, attorney Simon Offord provides an overview of build-out provisions in commercial leases, and how the provisions are used to balance the interests of the landlord and the tenant. He describes the letter of intent process, and breaks down the many components of build-out provisions, including cost sharing, rent commencement, deadlines & delays, substantial completion, details of the project, approval rights, and escape options. He discusses what issues can occur before the improvements are completed, as well as what prompts a breach of lease lawsuit after the improvements are made. Attorney Offord concludes the webinar with important things to consider before signing a commercial lease with build-out provisions. Outline of Webinar: 1. Introduction of Simon Offord 2. What Are Build-Out Provisions? -What is the Goal of Build-Out Provisions? -Balancing Act of Competing Interests -Landlord Interests in Build-Out Provisions -Tenant Interests in Build-Out Provisions -Common Terms -Sample Build-Out Provisions -Letter of Intent Process 3. Structuring Build-Out Provisions -Cost Sharing Between Landlord and Tenant -Determining Rent Commencement -Deadlines, Phases, & Delays -What is Substantial Completion? -Details of the Project -Approval Rights -Escape Options -Sample Escape Option of Build-Out Provisions 4. Issues Before Tenant Improvements Are Done -Not Completed in Time -Cannot Get Permits -Exceed Agreed-To Costs 5. Issues After Tenant Improvements Are Done -Poor Quality, Workmanship -Latent Defects -Failure to Pay Contractors 6. Breach of Lease Lawsuits 7. How Attorneys Help in Commercial Lease Build-Out Provisions -Before the Process -After the Process 8. Additional Considerations 9. Final Thoughts & Thanks You

2. DISCLAIMER
You agree, by participating in this webinar, that
the information presented does not constitute
legal advice and is being presented for
informational purposes only. You agree that no
attorney-client relationship is established or
assumed by participating in this webinar and that
the information or suggestions presented in this
broad overview may not apply to your specific
circumstances.

6. Balancing
Act of
Competing
Interests

7. Balancing Act

8. Landlord
Interests
Control The Process
Costs
Timing (Rent Commencement)

9. Tenant
Interests
Choice of Materials
Ability to Pay Up Front
Risk: Landlord Could Do It Cheaper

10. Common
Terms• “Tenant Improvements”
• “Build-Out Provisions”
• “Rent Commencement”
• “Substantial Completion”

11. SAMPLE

12. SAMPLE
Include a work letter as an
addendum to your lease

13. Letter of Intent
• Build-outs usually agreed to as part of LOI
• Should reflect tenant’s build-out intentions
• Include sufficient detail

14. Letter of Intent
• Build-outs usually agreed to as part of LOI
• Should reflect tenant’s build-out intentions
• Most people don’t include enough information
Put as much info as possible
about your intentions in your
LOI

16. Cost
Sharing
100%
Landlord
100%
Tenant
Shared
Spectrum

17. Cost
Sharing
Increase
Rent
Landlord
Provides
Allotment
Tenant’s
Own Costs
100%
Landlord
100%
Tenant
Shared
Spectrum

18. Cost
Sharing
Make sure to write out each
party’s responsibilities

19. Rent
Commencement
Get Rent
ASAP
Delay
Paying Rent
When To
Start
Charging
Rent
Landlord
Tenant

20. Rent
Commencement
Rent commencement is the most
contentious issue – so be clear!

21. Deadlines,
Phases, &
Delays
• Use benchmarks or milestones for completion of
entire project or phase of project
• Include provisions related to responsibilities of
either party in the event of a delay

22. Substantial
Completion
• How is it defined (or is it?)
• Who determines?

23. Details of
the Project
• Include as many details as possible, such as:
• Materials
• Brands
• Minimum/maximum costs
• Layouts
• Specifications

24. Details of
the Project
Avoid “shell” language or
ambiguities about the project

25. Details of
the Project
Involve your contractors early in the
process

26. Details of
the Project
Include work letters in the
addendum of your lease

27. Approval
Rights
For Landlords:
• Contractors
• Plans
• Review and
Comment

28. Approval
Rights
For Landlords:
• Contractors
• Plans
• Review and
Comment For Tenants:
• Plans
• Contractors
• Final Approval of project

29. Approval
Rights
Tenants - Use approval provisions to make
sure the final product is what you want

30. Escape
Options
Unexpected
Improvement
Costs
Compliance
Issues
Permitting
Issues
Hazardous
Waste/Toxic
Materials

31. SAMPLEa. Lessee Improvement Costs Contingency. The parties agree that should Lessee’s
architects and contractors determine that the total cost of the Lessee Improvements (as
such term is defined in the Lessee Improvement Addendum with an even date
herewith) are anticipated to exceed $XXXX, Lessee shall have the right to advance the
Expiration Date of this Lease to a date that is six (6) months following Lessee’s written
notice electing to so advance the Expiration Date of this Lease, which written notice
must be delivered not later than XXX, 2015, and, in such event, any rent paid by Lessee
through the date of such written notice shall be refundable to Lessee within thirty (30)
days of Lessee’s written notice. Lessee shall reimburse Lessor for the unamortized cost
of (i) XXXX YYY ZZZ, and (ii) leasing commissions paid by Lessor in connection with this
Lease. In the event of any such Expiration Date advancement by Lessee pursuant to this
Paragraph, Lessee shall provide Lessor with supporting documentation as to the total
estimated costs to complete the Lessee Improvements supporting Lessee’s election to
so advance the Expiration Date.

33. Not Completed inTime
Cannot Get Permits
Exceed Agreed-To Costs
Issues Before
Completion

35. Poor Quality,Workmanship
Latent Defects
Failure to Pay Contractors
Issues After
Completion

36. Breach of
Lease
• Mediation or Arbitration
• Lost Rent During Litigation
• Recovery of Attorney Fees

38. • “Screen”Your Lease
• Fill in the Gaps
• Protect &AdvanceYour
Interests
Before
The Process

39. • Help find resolution
• Collaborative solution
• Protect &AdvanceYour
Interests
After
The Process

40. • Franchisees
• Change Orders
• Contractor Issues
• Mechanic’s Liens
• ADA/Haz Mat
• Insurance
Overtime

41. Include Work Letter Addendum
Be Detailed In LOI To Set Early Understanding
Specify Each Party’s Cost Responsibilities
Be Clear About Rent Commencement Details
Avoid “Shell” Language & Ambiguous Terms
Involve Contractors Early In The Process
Add Approval Provisions To Ensure Your Satisfaction
Have An Attorney Review Your Lease
Final
Thoughts