Agreements for tenancy work

Because of the number of parties involved in tenancy work, it is important that agreements, contracts and other documentation are explicit in their definitions of all parties. For example, there may be two 'owners': one in the building contract and one in the tenancy contract. Similarly, there may be two or more contractors or even architects.

The following explanations apply for the purpose of this note: 

• owner is used specifically to describe the owner of the building in which the tenancies are required
• tenant describes the intended occupier of the tenancy
• client describes the party who has engaged the architect, and who may be a managing agent, a leasing agent, the tenant or the building owner
• main contractor describes the contractor for the main building contract (if applicable)
• tenancy contractor describes the contractor undertaking work on the tenancy.

There are a number of common factors that determine procedures in the execution of this type of work, such as:

• whether the building is occupied by the owner as well as by tenants
• whether the building is under the control of a managing agent
• the ease of access to the tenancy by the tenancy contractors
• relationships between the owner's architect and consultants, and architects and consultants engaged by tenants
• the stage at which tenancy works are carried out, eg during the construction stage of the owner's building contract, during the defects-liability period of the owner's building contract, or after issue of the final certificate in the owner's building contract – in most office-tenancy work, the work is performed after the main building contract has been completed
• whether the fit-out is being paid for by the owner, possibly as part of a lease incentive package, or by the tenant
• the scope of works allocated between Category A (base build) and Category B (fit-out) works which should be defined within the lease agreement
• the detail and accuracy of existing conditions drawings made available
• the level of information provided in design guidelines provided by the owner and managing agent.

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Approvals by authorities

Authorities' approvals in connection with the main building contract do not necessarily apply to tenancies. Separate building licences or permits are often necessary for the tenants' service works in addition to the building licence or permit for the main building. The architect should ascertain the true scope of approvals and, where such approvals do not extend to the tenants' works, arrange for such further approvals as necessary, taking into account the tenants' requirements and obligations. The question of which parties are responsible for applying for various approvals should be settled early.

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Communications between parties

In tenancy work, there are usually many parties involved. Because of this, there are many possible lines of communication and areas of rights and responsibilities. If these are not made clear to all parties from the outset, and accepted by them through proper documentation, a great deal of confusion can arise which can have a serious detrimental effect on the project and on the work of the architect or architects involved and potentially on their liability.

The architect for a tenancy project may be commissioned by the owner, a managing or leasing agent or the tenant. Although there may be advantages in commissioning the same architect for the building and the various tenancies, the tenants may wish to appoint their own architects, particularly if the building is complete.

As for any project, and irrespective of who engages them, the architect should always obtain a full and proper briefing from their client. The architect should check that the owner, managing or leasing agent has advised the prospective tenant of their responsibilities, eg the cost of altering services to suit tenancy layout.

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Terms of occupation

In large owner-occupied projects it is usual for the owner, managing agent or leasing agent to prepare for the tenant a specific document setting out conditions relevant to the construction of the tenancies.

The documents prepared by the owner for the tenant should include full details of the rights and responsibilities of all parties. For example, the question of who pays for inter-tenancy partitions, alterations to services and lighting, etc, should be able to be answered by reference to such a document. If this document is unavailable, details should be sought from the owner, the managing agent or the leasing agent.

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Other matters

Limitations on fixing methods, loadings, etc, which are due to the building design should be made known to the tenants. Similarly, tenants should be advised of any restrictions on contractors regarding access, work areas and hours, facilities, security measures, etc.

Expert advice is recommended to consider overlaps or gaps in insurance provisions in the building contract and in separate contracts for tenancies.

Where applicable, the main building contract should define the main contractor's obligations and responsibilities in regard to tenancies and work for or by tenants. Similarly, subcontracts within the main building contract should contain similar provisions.

Tenants sometimes install special equipment or require extensions of existing equipment or special services. Such items are often intended to be subject to warranties or guarantees for periods extending beyond the usual defects liability period. The effect of tenants' requirements on warranties is a matter for careful consideration and the various responsibilities arising from warranties must be properly documented.

Procedures for obtaining various non-statutory approvals in connection with tenancies should be clearly made known to all parties concerned from the outset. For example, the owner's agent may be appointed to approve certain documentation, a consultant to the owner's agent may be required to approve certain mechanical installations by tenants, or certain work by the owner’s architect could be subject to approval by a tenant.

When acting as the tenant's architect, you should not provide any form of approval to proceed with building works. Prior to issuing ‘For Construction’ documentation, ensure that:

• all leases have been agreed to and signed
• written approval has been obtained from the owner or agent
• the building and fire approvals have been obtained
• the contractor has made all necessary arrangements to enter the building and that a program of work has been agreed with the owner.

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