Last Updated May 14, 2019

Law and Practice

Contributed By McGuireWoods LLP

Authors



McGuireWoods LLP has a diverse real estate practice of more than 80 lawyers and land use planners in its offices in Tysons, Charlottesville, Richmond and Norfolk, with skills in a wide range of traditional and non-traditional real estate transactions. The firm’s transactional representation spans all aspects of real estate acquisition, development, financing and disposition, including acquisition, sale, leasing and financing transactions, as well as project finance, construction, public-private partnerships, negotiation of local and state incentives and privatization transactions. The team respresents clients around the world on various sides of such transactions, including Fortune 500 companies. The transactional practice is complemented by the firm’s land use expertise, as it frequently handles zoning and land use matters for development projects.

Tenants will incur various costs at the start of a lease, which will vary depending on the nature of the lease, the condition of the space, and the nature of their business. At a minimum, tenants must typically deliver a security deposit (usually in cash, but sometimes in the form of a letter of credit) and also the first one or two months of base rent and additional rent, although this will vary depending on the creditworthiness of the tenant.

Tenants may also incur costs for the buildout or upfitting of their space, to prepare the premises for use and occupancy. In many commercial leases, landlords will offer an “improvement allowance” that may be utilized by the tenant for the performance of its work. The terms of these allowances are heavily negotiated, but common features include requirements that (i) the landlord must approve all plans and specifications, and the identity of all contractors, (ii) the allowance may be drawn down by the tenant at regular intervals (usually monthly) only upon the delivery of invoices, lien waivers, and other customary documentation, and (iii) the allowance must be utilized within a fixed period (eg, one year). In addition, many landlords require that the allowance may be applied only to the “hard costs” of construction, as opposed to soft costs such as architects’ fees, moving costs, or furniture costs. In some cases, however, parties may negotiate for all or part of any unused allowance to be applied to offset the base rent or to be applied as a “refresh” allowance later in the term.

McGuireWoods LLP

1750 Tysons Boulevard
Suite 1800
Tysons, VA 22102-4215

+1 703 712 5000

+1 703 712 5050

info@mcguirewoods.com www.mcguirewoods.com
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Authors



McGuireWoods LLP has a diverse real estate practice of more than 80 lawyers and land use planners in its offices in Tysons, Charlottesville, Richmond and Norfolk, with skills in a wide range of traditional and non-traditional real estate transactions. The firm’s transactional representation spans all aspects of real estate acquisition, development, financing and disposition, including acquisition, sale, leasing and financing transactions, as well as project finance, construction, public-private partnerships, negotiation of local and state incentives and privatization transactions. The team respresents clients around the world on various sides of such transactions, including Fortune 500 companies. The transactional practice is complemented by the firm’s land use expertise, as it frequently handles zoning and land use matters for development projects.

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