Negotiating the Build-to-Suit Lease

Learn how to address and negotiate the unique issues that arise in build-to-suit leases.

Build-to-suit leases present different issues from typical leases of existing space and buildings. In most leases, the building is already in place, and the additional required work to prepare the premises for the tenant's use consists of mostly interior improvements or will be undertaken by the tenant itself. In a build-to-suit lease, the building may not yet be constructed, or the landlord will take on substantial work to renovate significant portions of the property and the building to accommodate the particular tenant's use, or the landlord will be solely responsible for all interior improvements and the risks as to the cost of the same. The parties are sometimes working from preliminary plans in negotiating the development of the space or the entire site. Build-to-suit tenants are often seeking to take space to meet a key business need or to consolidate functions, and as a result, the timing of completion is critical. As a result, the parties need to clearly understand the factors which could affect the timeline for construction, completion, and occupancy. During the COVID-19 pandemic, certain construction and permitting impacts were experienced as well as the potential for changed needs. This topic will address some of the key elements necessary to assure that the unique issues of build-to-suit leases are adequately addressed in the lease and the negotiations leading to the lease.