Landlords always want to “approve” a tenant’s construction plans, but why? It can’t be that they are more expert than the governmental department that checks “to code.” Construction has to meet the code’s requirements even if a landlord has approved the plans.
Is it a matter of taste? Does the landlord think the ladies room should be where the men’s room is located and vice versa? How about whether the tenant wants to use a smooth ceiling tile and all of the other stores have a popcorn tile (not counting the 42% that don’t)?
Certainly, it is legitimate to “vet” any items that threaten the “structural integrity” of the building or change common utilities or services. But, doesn’t the lease say that anyway? If is doesn’t, it should.
Our suspicion is two-fold: (1) landlords insist on it because they can (after all it is in the form lease); and (2) landlords are nosy. OK, we’ll confess – landlords ask for this right because they are afraid of the unknown. Since they can’t control many other unknowns, they will focus on what they think they can control. Honestly, that doesn’t make landlords unique; we are all like that: ignore the real threats because there isn’t anything we can do about them, and focus on minor item that we can control (or think we can control).
What concerns would or should a landlord have that the governmental construction official wouldn’t have? Ruminations thinks the key ones are: “(a) don’t make the place so unusable that the next tenant wouldn’t have any chance of salvaging some use out of the store; and (2) keep it in the range of “retail.” If we aren’t talking retail space, just adjust these concepts for yourself.
We have the same general notion about those “standard” provisions that ask a tenant to get the landlord’s approval for contractors and even subcontractors. Tenants with bargaining power cross those out. Those without are often saddled with delay and the prospect of higher build-out costs. Wouldn’t it be enough to bar smaller tenants from “self-construction”; require licensed contractors where a particular trade is licensed; and require contractors with a minimum level of build-out experience? Why add days or weeks of delay and uncertain standards? The lease already includes performance standards. Why add “process “ standards” on top of those. Tell the tenant that it has to sweep the floor; not what size broom to use and what the first name of the sweeper has to be.
Basically, Ruminations thinks a reasonably accurate floor plan and rendering should satisfy the usual needs of a landlord. Granted that “special” space calls for a “special” approach. We just think that too many leases start with the “special” approach.
Why does this matter? It matters because this is just another unnecessary encumbrance to both negotiating a lease and to letting the tenant get into the space as soon as possible. It leads to negotiations over how long do I get to review the plans; how detailed should the comments be; how quickly should the tenant respond with revised plans; who pays what for the reviews; what happens when the construction official wants changes made to the plans; what happens if field conditions require changes to the plans?; and more (just add to the list).
These thoughts are informed by two types of experiences over the years. First, landlords rarely have any objection anyway, and when they do, those objections almost always go to items that were known to be troublesome before the lease was signed. Second, tenants with bargaining power tell landlords to “jump in the lake,” and landlords respond by asking: “which lake.” Third, when there are construction comments, they usually come from the landlord’s own employees who “need to keep their job,” feel obligated to “say something,” and never add value to the project.
Before brickbats (kindest definition: “blunt criticisms”) are hurled in this direction, we know this posting is pretty unforgiving and quite polemic. That’s our intent; but our intent is innocent. We want to provoke the leasing community to think about these kinds of issues and to use those thoughts to make the lease negotiating process less time consuming, less expensive, and less confrontational.
Ruminations is looking to rid our form leases of provisions that only get in the way of getting the deal done. For those landlords (meaning almost all landlords) who just “can’t let go” of this kind of “control,” we urge that you revisit your “form” plan review language and include only provisions that address legitimate concerns specific to the overall property. Ruminations knows this is “tough.” We’ve got millions of square feet of landlord-side experience that tells us it is “tough.” We’ve also spent thousands of hours negotiating provisions like this and have never been drawn into a single situation where it mattered. Large tenants will get their way and have the ability to build-out what they want. Small tenants generally can’t do damage (if they meet construction code requirements) because they can’t afford to do extensive build-outs.
Share your thoughts with the rest of your real estate colleagues. We’ve made that easy in this posting because, to make our own one-sided point, we’ve just “flown over” a whole bunch of legitimate concerns, figuring that our readers will cover those for us and for everyone else. Just look right under the title for this posting and click where the word “comment” or “comments” appears.