As Project Managers, we are constantly engaging with industrial tenants and occupiers who have agreed key commercial terms or signed transaction documentation without careful consideration and full understanding of the inherent risks and commercial exposure, when securing their new business space requirements. Unfortunately, this can be a costly exercise and lead to challenging situations and or/delays to key project deliverables.
To avoid finding yourself in this position, it may be worthwhile engaging a Project Manager to provide best in class advice from project inception right through to completion. Not only will this add value and improve the financial performance of your industrial asset, but it will also minimise the long-term commercial exposure and risk to your business.
As Project Managers, we work alongside the leasing agent or client representative during the negotiation through to completion of any transaction document - whether that be an agreement for lease, a lease renewal or contract of sale. We represent our client’s interests, adding value and de-risking the process and enable you to make informed decisions.
Through our experience, we have outlined below the three key considerations all tenants and occupiers should be aware of when dealing with transaction documentation.
1. Technical requirements to be formed as part of the base building offer
All incoming tenants will have performance brief requirements. For example, you might require increased height or floor loading to account for internal storage requirements in certain areas of your facility, you may require increased base building services, functionality or fitout aspects over and above specific thresholds/limits. The aim of reviewing technical requirements from a building, engineering and architectural perspective is to ensure these requirements form part of the base building offer, deliver long term operational efficiencies to your business and do not cause abortive works costs, obsolescence or delays to your project. Not only will this result in ensuring you achieve the long-term operational efficiencies and cost savings, an all-round better offer for the tenant, but it will also close the gap, ensuring that the landlords obligations are aligned with your expectations on your new business space.
2. Key project milestone dates / expiry dates
3. Terms & Conditions and clauses
These can be ambiguous and favour the landlord (especially around early possession/sunset dates). To de-risk the project you need to carefully consider the consequences for failure to meet those dates. In our experience, the most common issues we come across include:
- Extensions of Time : If there is a delay on site or delay in achieving key milestone dates and the conditions are written in favour of the landlord, there may be no mechanism within the transaction documentation to mitigate the delays and reduce the commercial exposure to the tenant or occupier on your current premises.
- Ambiguous variation and PC Sum clauses: It’s important to review how these are determined and the commercial impacts.
- Failure to meet sunset dates: What are the consequences of failing to meet these key dates and assessing liquidated damages?
- Payments towards fitout works or building upgrades forming part of any landlords incentives or tenant / occupier contributions.
- Environmental / land considerations? For example, is the site contaminated or is if fit for industrial use?
- Ensuring there are correct titles for the land or the creation and registration of easements over the land? Does it require development approval, do they cause operational constraints and do they require access considerations?
- Statutory Approvals and Permits for the facility: Ensuring all required development approvals and statutory permits include both building and use, do not cause operations constraints and enable unrestricted access to your premises;
- Completion of tenant / occupier fitout works: How will these works be completed? For example, integrated with the landlords works, engaged by the tenant / occupier and coordinated by the landlord during early access periods, or completed post Project Completion?
- Project Completion certification: Has the landlord selected a favourable certifier and are they independent?
- Defects management, supplier warranties and as-built documentation and ongoing maintenance and DLP periods: What happens, who’s responsible and how is the process managed?
So, with the above key considerations in mind, are you about to negotiate or document the transaction documentation for your new business space requirements? Is there a pending lease expiry or key milestone dates on your existing premises about to occur? Does your team need assistance in negotiating and documenting the transaction documentation on your new property requirements? Engaging one of our experts from the outset will ensure the most efficient delivery with respect to time, cost and quality, and most importantly, ensuring your expectations are aligned with the landlord’s obligations. Contact one of our industrial experts today.
