The term shell lease is used when the rented property is an unfinished shell of a piece of commercial real estate, where the tenant must complete design and construction and add any necessary furniture, fixtures, and equipment
Warm Shell Property
A warm shell property is best described as a residential or commercial unit with minimal furnishing
A warm property is also known as a vanilla shell
Warm Shell
A warm shell is a residential or commercial building with furnished interiors, cooling and heating system, rest-rooms and plumbing, interior lighting (parameters may vary), etc
These property units are normally ornate and ready-to-use
Warm shell in the residential market is at a lower cost as compared to the projects offering furnished apartments
The landlord may agree to cover the cost, the tenant might take responsibility, or the cost of the build-out may be shared – based on negotiations between the parties
Reverse build to suit
It is an agreement where the tenant constructs a building for itself using funds provided by the landlord investor
Build-out
The transition from a cold shell to a warm shell is referred to as build-out
Shell Lease
It is a commercial real estate lease agreement for an unfinished interior that the tenant will customize to their specific requirements
Shell lease can exist in many forms depending on the work that has already been completed on the property and the work that remains to be done
Ideally, a warm shell unit should be bought directly from the owner if you are looking for some upgrades to the property
Contents in the lease agreement of warm shell properties
1) premises details
2) warm shell work Phase 1 outdoor area Phase 2 complete all works and improvements Tree removal Screening Measurement of premises Connector contingency
3) delivery and acceptance of possession Delivery date Tenant improvement work Warranty Disclaimer Early access
4) Tenant improvement work Scope of work Plans and specifications Contractors
5) Allowance
6) Tetm Initial term Optional extension terms Arbitration deadline
7) Rent Rent commencement date Free rent period Operating costs & taxes Taxes Rent definition Additional rent Payment of rent and application of payments Late payment charges
8) prepaid rent
9) security deposit
10) utilities
11) permitted use and restricted use
12) outdoor areas
13) compliance with laws and recorded matters
14) signs
15) parking
16) tenants maintenance and repair responsibilities
17) landlords maintenance and repair responsibilities
18) tenants alterations
19) liens
20) insurance and indemnification Tenants insurance Landlords insurance Policy requirements Waiver Increase in premiums indemnification
21) landlords right to enter
22) damage or destruction
23) condemnation
24) assignment, subletting, and change in control
25) events of default
26) remedies
27) hazardous materials
28) subordination, attornment – notice to mortgage
29) estoppel certificates
30) surrender
31) holding over
32) notices
33) satellite
34) additional provisions
Lien
A right to keep possession of property belonging to another person until a debt owed by that person is discharged
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