If tenant is doing build-out, when does payment of rent usually start?

In Leasing Property - Asked by Cindy S. - Aug 19, 2010
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Answer(s)

Jeff B.
schererville, IN

Depending on the extent of the work, either when tenant has certificate of occupancy (CO)or allow some time for him to complete work.

Aug 19, 2010
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Rob B.
Chandler, AZ

Cindy....
This is negotiable, based on circumstances of lease. However, usually the tenant must pay the security deposit at the execution of lease. It is true that in the negotiations a reasonable amount of time for the build-out may be allowed. I have seen as much as four months in leases I have written.
If there is a commission involved, usually the agent earns one-half of the commission at the execution of the lease and the remaining one-half at the commencement of the lease, Certificate of Occupancy or move in by tenant.
Rob Baird, CA RE Lic. #544165 (One of the oldest, active licenses in CA)
951 515-5855

Aug 19, 2010
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Michael H.
Broker/Agent
Cordova, TN

Best to negotiate during the LOI process. Most of the time the landlord will want to establish a limit of time if the rent starts at the time of the certificate of occupancy to prevent an extremely slow build out.

Aug 19, 2010
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Dawn L.
Broker/Agent
Boca Raton, FL

This is laid out in the LOI phase, it is put in the lease how much time for build-out is permitted. I'd make certain to have my owners state some 'deadline' for when build-out is to be done - especially if the tenants are going to be responsible for getting it done.

Aug 19, 2010
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Russell N.
Property/Asset Manager
South Yarmouth, MA

I usually say 14 days from the date the occupancy permit is issued, or the date the they open for business, which ever comes first.

Aug 20, 2010
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Paul M.
Broker/Agent
Evansville, IN

This is usually based on the duration of the lease, the strength of the company and personal guarantees signed. Ideally rent begins the first of the month. BUT, if you do decide to give them some time, the rent you do lose should be made up within the first year of the lease. The amount of money they are putting into your property for their changes should not even be considered. There are plenty of properties taken of the market and renovations begun that never seem to end! ...and some that stop mid way and the company closes before it ever opens. Leaving you with no income for that period AND having to spend your money to get it back to a vanilla box.
Your business is collecting rent, if you're an owner, not subsidizing their start up. A minimal abatement is usually enough to secure a tenant if you are truly competing with another location...if they make an offer to lease...its because they want to be there.

Aug 21, 2010
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