Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Turnkey Build-Outs

By Kristen N. Wilson
January 31, 2016

A tenant's ability to finance its leasehold improvements is an important negotiated term of a retail lease. Some of the ways the landlord and the tenant address such financing are providing that: 1) the tenant takes the space “as-is” and pays for the build-out through private funds; 2) the tenant obtains an improvement allowance from the landlord and hires the tenant's own contractors to perform the build-out; or 3) the landlord agrees to complete the tenant's entire build-out and amortize the costs thereof into the tenant's rent. In this third arrangement, often referred to as a “turnkey” build-out, the landlord delivers the keys for a completed premises to the tenant when the construction of both the base building and the tenant-specific improvements are complete.

For tenants that lack sophistication and financial resources, a turnkey build-out can be advantageous because the tenant benefits from the landlord's economies of scale with regard to the costs of construction and supplies and the use of an experienced construction and design team to which the tenant may not otherwise have access. National or regional tenants can also benefit from turnkey build-outs, allowing them to focus on multiple projects simultaneously without risking budget busts. A turnkey build-out can also benefit the landlord, as the landlord can control the scheduling of contractors in order to: 1) avoid conflicts with other construction in the building; 2) avoid interference with the quiet enjoyment of other tenants in the building; and 3) mitigate potential delays in the rent start date due to the tenant's delay or inability to obtain permits.

However, a turnkey build-out is not without risk. While many attorneys delegate work-letter issues to be handled by the respective construction personnel, most work letters include legal provisions which affect the obligations of each party. Close attention should be paid to the drafting and negotiation of the work letter and the relevant lease provisions. The following discussion highlights some of the key issues to be considered from both the landlord and tenant perspectives in connection with turnkey build-outs.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.