Mastering the Lease
Strategies to Neutralize Landlord Tactics & Optimize Construction
The Philosophy: Time is Money
Lease negotiation is not just about rent per square foot; it is about defining the battlefield for construction and operations. Landlords often leverage vague delivery conditions and hidden fees to protect their bottom line. A strategic tenant negotiates specifically to create "Cash Flow Positive" scenarios by accelerating openings and ensuring Rent Commencement Dates (RCD) slide when the landlord fails to deliver.
1. Defining Deliverables & Scope
Vague landlord descriptions limit their liability but increase your costs. We must demand specificity to prevent design scope gaps.
The "Specifics" Checklist
Never accept "As-Is" without these critical reports provided before design starts.
- ✓Hazmat/Abatement Report: Mandatory for existing space demo.
- ✓MEP Capacity: Specific voltage, HVAC tons, water pressure/flow.
- ✓Structural Details: Rooftop pathways, storefront conditions.
- ✓Utility Locations: Exact valve and tie-in locations provided post-kickoff.
Cost Risk: Vague vs. Specific Scope
Comparison of potential unforeseen costs.
2. Exposing Hidden Profit Centers
Landlords embed "junk fees" and markups into the construction process. Identify and strike these non-cost items.
Common Landlord "Junk Fees"
Items to strike from the lease.
Negotiation Targets
Temporary Power
This is often a profit center. Negotiate for power sufficiency to be included. If unavailable, trigger an RCD Slide.
Review & Admin Fees
Strike dumpster fees, parking fees, and sprinkler shutdown fees. These have no direct cost to the landlord.
Utility Markups
Require a sub-meter at landlord expense. Ensure rates are competitive with local utilities, not arbitrarily marked up based on square footage.
3. The RCD Slide Strategy
The "Rent Commencement Date" (RCD) is your leverage. Negotiate "Day-for-Day" slides for any landlord delay. This incentivizes the landlord to perform.
Plan Review
Landlord must review plans within 7 Calendar Days. Every day late = 1 day rent slide.
Signage & Barricades
Design manager reviews within 2 Business Days. Late approval slides the rent clock.
Work Access
Roof or utility room access not granted within 2 Business Days triggers a delay claim.
4. Controlling Contractor Costs
Landlord-required contractors often charge premiums because they have a monopoly. We break that monopoly through lease language.
Cost Impact: Mandated vs. Competitive
Savings potential by requiring competitive market pricing.
Hourly vs. Fixed
Negotiate "Not to Exceed" hourly rates for service connections. A $3,000 fixed fee for 2 hours of work is unacceptable.
Union Requirements
Strike union requirements unless absolutely unavoidable. Union labor almost always increases build costs.
Permit Fees
Maintain permit fees as reimbursable items. This prevents contractors from marking up administrative costs.
5. The Finish Line: Closeout & Cash
Due at construction start. Application form included in lease exhibit.
Due at 50% completion. Paid within 14 days of app receipt.
Due at completion. Digital lien releases accepted.
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