A significant clause in the lease is the delivery date. This is typically defined by the space being “substantially complete”. Substantially complete means that other than minor punch list items. the space is ready for occupancy. However, an outside date must be established in the new lease to coordinate the occupancy date with the lease expiration date of the tenants present lease. If the landlord drags his feet and delivers the space late, the tenants could face holdover charges in their present lease, which can be onerous. Typically, the holdover clause makes the tenants pay between 150% and 250% of the present rent for every day the tenant stays in the building after the lease expires. However, some leases say that the tenant will also be liable for any damages to the landlord caused by the tenant staying past their expiration date. A landlord may incur damages if they have rented the space out to a different tenant beginning with the present tenants lease expiration. If the present tenant doesn’t leave the space on time the landlord cannot begin the work for the new tenant. If the new tenant can’t get out of their present space on time and incurs a penalty, that tenant will pass that penalty on to the new landlord who will pass that penalty onto the holdover tenant.
The best way to avoid this is by establishing an outside date for the work to be completed in the new building and the new lease to begin. In order to enforce this outside date a penalty clause must be established. That clause will charge the landlord 1 to 2 days concession for every day beyond the established outside date that the landlord is late.
Another way to enforce the outside date is by changing the language in the lease from: the landlord will make reasonable efforts to have the work done, to the landlord will make best efforts to have the work done. The phrase best efforts means the landlord will have to pay their workers overtime to get the work done on time.