Tenant Fit Out works come with a number of potential issues and pitfalls. Often the construction issues are left to the last moment and there is a mad scramble to put the correct documentation in place.
In order to help you on your way as tenants we have listed our “top ten” issues, which should be considered by every tenant before engaging in fit out works.
1. Method of procurement
The method of procurement you choose can have a big impact on the ultimate cost of the fit out works as well as the time taken to complete the works. It can also impact the level of control you have over the design and finish of the final interiors. Should you go for design and build, or conventional? We can advise you on the pros and cons of the various options available.
2. Forms of contract/contract amendments/risk and responsibility
Many standard forms of contract do not cater specifically for the fit out scenario and do not address the practical realities of risk and responsibilities for fit out works (including insurance obligations etc). We can help you make the necessary changes to the contracts so that the risk is properly managed.
3. Time for completion/liquidated damages
Consideration needs to be given not only to your losses in the event of a delay, but also any liabilities you may have under any Agreement for Lease or Licence for Alterations. Liquidated damages are not a "one size fits all" solution, and such clauses need to be carefully considered and tailored to fit your particular requirements.
4. Insurance requirements
Care needs to be taken to clarify who is responsible for insuring the works and/or the existing structure. Care needs to be taken to ensure that there are no gaps in cover, and that you are not left carrying an uninsured risk, or unable to claim under an insurance policy held by another party.
5. Design/dealing with changes
Who is to have control of the design? Could there be design changes during the progress of the fit-out works? Without adequate safeguards in place, you may find that you end up with a design that does not meet your needs and/or incurring a high cost for any changes.
6. Programme/sectional completion/phased occupation
Programme is often a key issue for a tenant. Sectional completion and/or phased occupation may be of benefit in allowing you to start working from a site before all of the fit out works have been completed. However, taking occupation of part of a construction site before completion of the whole has a number of risks, which can come as a nasty shock when problems arise. We can help you to identify and manage that risk.
7. Defects in existing areas/shell & core
Who is responsible for remedying existing defects? If the landlord (or others), what control do you have over the timing of remedial works and/or the impact this may have on the fit out works?
8. Payment regime
The Housing Grants Construction and Regeneration Act 1996 (as amended) requires strict procedures to be followed by employers when dealing with payments to contractors and consultants. The consequences of failure by a tenant employer to comply with the detail of the Act can be severe. We will make sure you and your team are fully aware of the processes and provide you with the necessary pro forma documents.
9. Design warranties and/or product guarantees
What design warranties and/or product guarantees may be required? Do you have the benefit of these? What is their scope and for how long do they last? All these issues are important when you are entering into a fully repairing lease.
10. Scope of fit out
You will need to be careful to clarify up front what will constitute the fit out works, whether any of these are to be paid by the landlord, and whether you may start the fit out works prior to the completion of any landlord works (such as shell and core). A failure to agree the scope of the works at the beginning can leave you with a reduced period for carrying out your fit out works along with increased costs.
What should I take away from this article?
Before engaging in any fit out works you, as a tenant, should always keep the above ten principles in mind. Giving proper thought as to how the works will be carried out, and having the correct documentation in place, will ensure the works are completed to the high standard required and hopefully too on budget and to time. It may also help avoid any lengthy disputes. If any disputes do arise, having the appropriate contracts in place will help to protect your position.
If you have any questions on the above, or if you are considering undertaking fit out works or have questions about an existing or completed fit out project, please contact one of our team who would be happy to help.