A rental-to-suit (or design-build-leasing) contract is essentially an agreement of an owner/developer to build a dedicated building, usually for a single tenant. The owner usually becomes the owner or lease of the land (and once the building is built) and has the option of renting the building to a new tenant after the end of the lease of the costume construction to the original tenant. Costume leases are generally longer term as a normal lease to allow the lessor to recoup its investment over the duration of the rental period. Another important timing concept is the determination of when the building is complete enough to trigger, among other things, the start of rent payment (or, if applicable, rent-free periods). This date is generally described in “suit construction” leases as the date of “substantial completion” or “essential power,” often by reference to the essential performance determination provisions defined in the Construction Lien Act (Ontario). While the landlord wants a definition broad enough to require the tenant to move in and pay the rent despite some incomplete details, the tenant will want to make sure that this information is minor and will not interfere in any way in his occupation. To compensate for these differences in approach and avoid potential problems, it may be necessary to supplement the above provisions of the Construction Link Act (Ontario) with greater specificity. Tenants generally agree to lease a construction property for a specified period (10 to 20 years are common) and they often have the option of extending the lease beyond the initial term. Most costume building properties are free, which means they only have one tenant. Construction leases as a result are usually leases for sale at three times the net amount. This means that the tenant is responsible for property taxes, property insurance and most maintenance and repair costs for the duration of the lease. Suppose it costs a developer $2 million to build a building, and that current market conditions have created a 7% perspective back on costs.
Build To Suit Agreement