In a build-to-suit, the landlord constructs a facility to the tenant’s specification and leases it, usually for a long term.
Structure. A lease signed before construction, with a work letter or a separate development agreement governing design and construction, and rent commencing on delivery.
Design. A defined process for developing plans from the tenant’s programme, with approval rights, a schedule, and a mechanism for resolving disagreements without stalling the project.
Cost and rent. Rent frequently derived from a return on total project cost, which makes the definition of project cost and the treatment of changes the central economic term. A guaranteed maximum price, an open book, and audit rights protect the tenant.
Schedule. Delivery date with defined excused delays, tenant delay defined narrowly, remedies for landlord delay — rent abatement, then a termination right after an outside date.
Delivery standard and punch list, with a mechanism for completing outstanding items and holdback of funds.
Warranties. Assignment of construction warranties to the tenant, or a landlord obligation to enforce them, and a defined period during which the landlord corrects defects.
Financing. The tenant’s covenant strength supports the landlord’s construction loan, and the lender will require estoppels and a non-disturbance agreement before funding.