Turning a speculative office development into a high-tech location
TOPTICA EAGLEYARD leased a speculative new office development with plans to convert and fit out the premises for its own specific requirements, including laboratory and production areas. The lease had to work even though the necessary permit for the tenant's intended conversion had not yet been granted.
The client.
TOPTICA EAGLEYARD develops and manufactures high-performance semiconductor laser diodes for demanding applications. Its premises therefore need to accommodate not only conventional office use, but also specialised laboratory and production functions.
What the matter was about.
TOPTICA EAGLEYARD intended to lease a newly developed office building that had been constructed speculatively and was not yet tailored to the company’s specific requirements. To create its new location, TOPTICA EAGLEYARD planned to invest substantially in converting and fitting out the premises at its own cost, including the addition of laboratory and production areas.
We were instructed to develop the first draft of the lease and guide TOPTICA EAGLEYARD through the leasing process. The central challenge was the relationship between the lease and TOPTICA EAGLEYARD’s planned investment in the property. The premises could only serve their intended purpose once the required conversion and fit-out works had been approved and implemented.
A key issue was what would happen if the necessary permits for the conversion and intended use could not be obtained. TOPTICA EAGLEYARD needed a clear contractual route out of the lease rather than being committed to premises it could not use as planned. At the same time, its substantial investment in a third-party property required additional protection beyond the lease itself.
The task was therefore to create a contractual framework that enabled the project to move forward while protecting TOPTICA EAGLEYARD against the key risks associated with its investment. This included a right to terminate the lease if the required permits could not be obtained, as well as securing TOPTICA EAGLEYARD’s investment in the premises through a tenant easement.
How we worked
The process, step by step.
-
Structuring the Lease
Development of the key contractual structure for the lease, taking into account TOPTICA EAGLEYARD's planned conversion and fit-out of the premises.
-
First Draft
Preparation of the first lease draft based on the commercial terms and TOPTICA EAGLEYARD's specific requirements for the future use of the property.
-
Planning & Permitting
Close coordination with TOPTICA EAGLEYARD's architect on the proposed use, conversion and fit-out works and permitting requirements, translating the relevant planning aspects into the contractual framework.
-
Investment Protection
Development of the contractual and property-law protection for TOPTICA EAGLEYARD's substantial investment in the location, including a tenant easement.
-
Negotiation
Negotiation of the lease with the landlord and its advisors, with ongoing coordination with TOPTICA EAGLEYARD and the wider project team.
-
Finalisation & Signing
Final alignment of the lease, its schedules and the related documentation and support through to signing.
A secure framework for investing in a new location.
TOPTICA EAGLEYARD signed a lease that provides a reliable basis for transforming a speculative office development into a location tailored to its specific business requirements.
The contractual framework gives TOPTICA EAGLEYARD the flexibility required for the conversion and fit-out while addressing the central risk that the premises might not be approved for the intended use. If the necessary permits cannot be obtained, TOPTICA EAGLEYARD has a clear contractual route out of the lease.
At the same time, the substantial investment in the premises is protected through a tenant easement. The result is therefore more than a lease: it is a contractual and property-law framework that allows TOPTICA EAGLEYARD to invest in its new location with the necessary level of protection..
FAQ
Questions on this kind of work.
-
Can a commercial lease be signed before the permit for the tenant's fit-out has been granted?
Yes. Whether this is advisable depends on how the permitting risk is allocated in the lease. If the tenant cannot use the premises as intended without the permit, the agreement should clearly regulate what happens if approval is delayed, granted only subject to conditions or ultimately refused.
-
What should a lease regulate if the tenant carries out the fit-out itself?
The lease should address, among other things, the scope of permitted works, approval and coordination processes, interfaces with the landlord and the building, technical requirements, costs, permits, timing, liability and the position at the end of the lease. The exact framework depends on the extent and nature of the works.
-
When should legal counsel get involved in a lease involving substantial tenant fit-out?
Ideally before the key commercial terms are fixed. Fit-out responsibility, permitting risk, timing and exit rights can fundamentally affect the economics of the deal and should therefore be considered when the project structure is being agreed, not only when the full lease is negotiated.
-
Is it more cost-effective for a tenant to prepare the first lease draft or to review and revise the landlord’s draft?
Not necessarily. If the landlord is willing to negotiate on the basis of a tenant draft, preparing the first draft can be a sensible approach. It allows the provisions that matter to the tenant to be structured appropriately from the outset, rather than extensively revising a lease that may have been drafted heavily in the landlord’s favour.
In terms of legal fees, there is often no significant difference between preparing a lease from scratch and comprehensively reviewing and revising a landlord’s draft. The overall cost depends more on the scope and complexity of the project and the negotiations that follow.
Working on something similar?
Tell us what you are working on and where you need support.