Lease Issues Related to Initial Alterations—A Tenant’s Perspective

Leasing new space can be a stressful and expensive endeavor for any tenant; particularly the initial buildout phase. To ensure that a tenant will be able to build out its space in a timely fashion and in the manner it desires, there are a number of issues which should be addressed in the lease. This article will discuss tenant considerations when negotiating a lease, so as to avoid pitfalls related to landlord constraints on alterations that may: (i) result in delays; (ii) cost overruns; (iii) prevent tenant from constructing what it desires; and/or (iv) at worst causing the space to be non-functional for tenant’s intended business.

Tenants should always negotiate that the landlord will reasonably approve all aspects of alterations. With that said, if a landlord insists that its approval of alterations affecting the building’s structure, systems and/or exterior be in its “sole” discretion, tenant should, prior to execution of the lease, seek landlord’s pre-approval of “concept” or “design” plans to attach as an exhibit to the lease, subject only to landlord’s approval of a full set of construction drawings. If the construction drawings are in line with the pre-approved “concept” or “design” plans, landlord should have no right to object, even to aspects that affect the building’s structure, systems and/or exterior, so long as the construction drawings are substantially consistent with the pre-approved plans.