We All Know What Turn-Key Means - Don't We?

Lawyers may be great in helping you to understand the waiver of subrogation clause (actually, many of them aren’t), but for those of us lawyers who didn’t graduate with a degree in engineering, reviewing a Work Letter or Construction Agreement is sometimes truly ancient Greek for us. There are, however, some things we have learned over the years through hard (meaning bad) experiences that you should keep in mind when you’re negotiating the Letter of Intent and the Lease with a “turn-key” buildout.

In certain markets a turn-key buildout is the market norm; in smaller leases it is far more common, since it is often not worth the time, aggravation, expense or cost uncertainty for an office tenant to build out the space by engaging its own architect and contractors. In those events, the Landlord will perform all required construction work within the premises and provide a turn-key buildout: basically, the Landlord builds out the space and simply turns the key over to the Tenant for occupancy once the work is complete. In addition, the turn-key buildout places the risk of construction overages on the Landlord, versus a construction allowance where such risk is on the Tenant.

When negotiating a Lease with turn-key improvements, several points should be borne in mind. First, it is essential that all important elements of the construction work are agreed upon prior to Lease execution. Threshold issues such as the layout of the space, the size and the number of offices, and location of the conference room and pantry will be reflected on the approved space plan (which is almost always attached to the Lease). However, also critical are such things as: the quality and type of carpet (not just the color, for example, but how many ounces); the wallcoverings; the specifications for any millwork that the owner will provide; the number and locations of outlets for both data and electric; which walls will be soundproofed; and the type and model numbers of any pantry equipment such as a dishwasher and refrigerator. All of these details, and many more, need to be agreed upon. Second, in addition to agreeing on the particulars of the foregoing and similar items, detailed construction plans and specifications which incorporate all of the preceding need to be attached to the Lease as exhibits. Finally, those exhibits must be reviewed to ensure that they accurately reflect the agreement of the parties.

While we probably all know what a turn-key deal is, many of us might not be aware of the details that need to be included in our documents to make that turn-key work well for our clients. By having both parties agree to the specifics of the construction prior to Lease execution, and attaching those agreed-upon details to the Lease, you can avoid that dreadful post-Lease execution call that will invariably be directed to you: “I thought you told me the Landlord's buildout included . . ."

These are just some of the ways you can help your client when negotiating your client's commercial Lease. If you're looking for experienced commercial real estate attorneys, give the lawyers at Oliveri & Tammadge, LLC a call.