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Early Access Letters

By Glenn Browne
August 18, 2003

It's hard to imagine financing construction on a premises in which you have no legal interest. However, in order to meet construction schedules, opening date projections and cash flow targets, a tenant must sometimes consider whether it is willing to commence construction without having an executed lease or agreement in place. While this decision may expose the tenant to considerable risk, under certain circumstances both the landlord and the tenant may be willing to proceed with construction, absent the existence of an executed lease or agreement. In order to allow a tenant to construct its space prior to executing a lease for the space, a landlord and a tenant would be wise to enter into an Early Access Agreement providing for certain understandings between the parties, prior to the time that the lease or agreement is executed. The Early Access Letter need not be a long or complicated document, but should provide for certain crucial understandings to establish the rights and protect against the liabilities of each party, as well as to create an understanding of the relationship between the parties. At a minimum, the Early Access Letter should cover the following topics: i) plans; ii) insurance; iii) indemnification; and iv) what happens if a lease is not executed by the parties; and v) construction rules and regulations.

Plans

Before a tenant is allowed access to the premises to begin construction, there should be a detailed understanding between the landlord and the tenant as to the work that will be performed by the landlord and the tenant in the construction of the premises. Thus, before any work is commenced, the Early Access Letter should provide that the tenant must submit detailed plans and specifications identifying all of the work to be performed by the landlord and the tenant. The Early Access Letter should require the landlord to initial the tenant's plans, acknowledging the landlord's acceptance of the terms of the plans, or noting those items on the plans that are unacceptable to the landlord. The Early Access Letter should also require the tenant to re-submit the plans to the landlord until the landlord accepts the plans and specifications. Finally, the Early Access Letter should provide that, once the plans and specifications are accepted by the landlord, a set of the final plans will be kept at the premises during the course of the tenant's construction work and that the tenant's construction work shall strictly adhere to the landlord-approved plans and specifications.

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