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Entering into a lease and setting up your business is an exciting step for you in your business journey. One of the first things you need to decide upon entering your lease is how you want to undertake fit-out works to make your premises suit your business. This article discusses:

  • the stages and various important aspects that you should be aware of when planning and carrying out your fit-out; and
  • any additional or supplementary documents or agreements that you should know about.

Before Carrying Out Your Fit-out

Before planning your fit-out, the landlord may provide you with some additional documents, including a: 

  • fit-out deed; and
  • fit-out guide. 

1. Fit-out Deed 

A fit-out deed, also known as a fit-out access deed or fit-out licence, is a legal document which provides you with a licence to access the premises for a set ‘fit-out period’. This fit-out period is usually before the commencement of your lease and will allow you to access the premises in order to carry out your fit-out. In general, this is only provided in cases where you have negotiated access to the premises before the commencement date of your lease.

You should be aware of any preconditions that are attached to your early access licence. 

For example, before access is provided, a landlord will usually require the tenant to provide signed copies of the: 

  • lease (and any other documents); 
  • security deposit or bank guarantee; and 
  • required insurances under the lease.

In particular, landlords may require to take out specific insurances only relevant to the fit-out period. In some cases, an early license may also be incorporated directly into the lease and a separate document will not be provided.

2. Fit-out Guides

If your premises is located in a shopping centre or in a commercial building, the landlord may also provide you with a fit-out guide. While this is not a legal document, leases will often require the tenant to comply with the fit-out guide in carrying out their fit-out works. These guides may set out specifics with regards to the type of installations you can make and which specific styles which are permitted or forbidden. If a guide is relevant for your premises, you should ensure you consult it prior to drawing up any plans.  

For example, if you are planning to install signs for your business, the fit-out guide may set out where you may or may not install signs on the premises.

Requirements for Consent

Before you carry out your fit-out, you will need the landlord’s approval for your fit-out plans. Usually, your lease will require that you provide drawings and specifications of your fit-out. You will often need a professional contractor to prepare these. 

Leases will also often put the responsibility of obtaining any council or authority approval for tenant’s fit-out works on you. This means that if you are carrying out any works that will need the approval of the local council, you may require documents such as a: 

  • development approval; or  
  • complying development checklist.

If this is the case, you must apply for this yourself. It is important to keep in mind any necessary timeframes for when your fit-out must begin and end. 

During Your Fit-out

Once your fit-out has begun, it is important that your contractor understands what is required.  Leases often require that the tenant be the ‘principal contractor’ with regards to any works and alterations that you carry out on the premises. This means that you are the person legally in control over the construction on the premises. Further, you are in charge of managing and complying with any work health and safety requirements. 

If possible, you should consider seeking a right to pass on the principal contractor obligation to your contractor. However, if this is not possible, you should ensure that your contractor understands the: 

  • plans and specifications of your fit-out; 
  • requirements under fit-out guides or fit-out deeds; and  
  • importance of complying with any work health & safety regulations.  

End of Your Fit-out

Once you have completed your fit-out, you may need to provide a completion certificate to the landlord showing evidence that it is complete and ready for trade. At this stage, it is important to consider the timeframes that are set out in your lease. 

For example, your lease may set the commencement date to be: 

  • the completion of your fit-out period; or 
  • when the tenant begins trading.

Depending on the scenario which occurs first, if your fit-out is completed before the end of your fit-out period and you are ready to begin trading, your lease will begin together with your lease obligations, such as paying rent and outgoings. 

Other Considerations

Any Landlord Works

There may be times where the landlord will carry out works to the premises around the same time as your fit-out. If you are aware of this, you should make enquiries to make sure that any landlord works will not conflict with or interfere with your own fit-out works. If you are occupying a premise where the base building has not yet been constructed or is only partially constructed, you may also be provided with an agreement for lease. This will set out specific timeframes for the landlord’s works to be completed and for your works to begin. Before entering into any agreement, you should consider the timeframes carefully to ensure that you will be able to carry out your fit-out works as you plan to and without interference from the landlord.

Other Works

Once you have carried out your fit-out works, if you require any further works or alterations to the premises during the course of your lease term, you will need to apply for the landlord’s consent again. Most leases will specify that you cannot carry out any alterations to the premises without the landlord’s consent. You may also need to provide new plans for any other alterations, depending on the extent of your works.

Costs

The cost of fitting out your premises will usually be your responsibility, unless the landlord has agreed to provide any financial contribution. However, it is important to bear in mind that this is not the only cost associated with your fit-out. In addition to the actual construction work involved, you may also be required to pay the cost of:

  • hoarding (temporary construction structure);
  • your landlord’s consent for your fit-out (including any architect’s or professional fees incurred in reviewing your fit-out plans); and
  • obtaining council approval (if required).

Key Takeaways

Carrying out your fit-out and seeing your business come to life is exciting. However, you should always remember the requirements and lease obligations you need to comply with at the various stages of your fit-out. Your landlord will need to provide you with a fit out deed and guide for completing the work. Then, you need to gain your landlord’s consent to any works. If you have any questions about fitting out your premises, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

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