Last edited 27 Aug 2020

Fit out of buildings


[edit] Introduction

Fit out’ is a term used to describe the process of making interior spaces suitable for occupation. It is often used in relation to office developments, where the base construction is completed by the developer, and the final fit out by the occupant. The occupant will generally be leasing space as a tenant from the developer/landlord.

Approved document L of the building regulations defines fit out as:

...that Work needed to complete the internal layout and servicing of the building shell to meet the specific needs of an incoming occupier. The building shell is the structural and non-structural envelope of a building provided as a primary stage (usually for a speculative developer) for a subsequent project to fit out with internal accommodation works.

Depending on the degree of completion of the building, and the interior specification required by the occupant, fit outs can take a range of different forms:

[edit] Shell and core

Shell and core works will generally comprise the structure, cladding, base plant, completed common areas and external works. It will include fitted-out main reception, lobbies, staircases, toilets, lift shafts, basements, loading bays, car parking, and so on.

[edit] Category A fit-out

Category A (Cat A) generally describes the level of fit out that the tenant's own space is completed to by the developer. There is no standard definition, but a category A fit out may include.

If the tenant has very complex fit out requirements, this may impact on the category A fit out. In this case, they may make a contribution to the costs of the category A fit out to ensure that it meets their needs, and offset this against their own costs. This saves wasted time and money modifying the category A fit out.

[edit] Category B fit-out

Category B (Cat B) completes the fit out of the internal space to the tenant's requirements. This may include:

The developer may make ask the tenant to carry out some of their more sensitive category A works on their behalf during the category B fit out, when they may be less subject to damage. The developer will pay the tenant a sum equivalent to the cost of the works had they carried them out themselves.

[edit] Turnkey developments

A turnkey development provides the tenant with spaces that are fitted out by the developer so that they are ready for use.

These categories do not have standard definitions, and so it is very important that contract documentation sets out precisely what work is to be carried out and by who, rather than relying on ambiguous short-hand terms.

An agreement to lease between landlord and tenant should clearly define:

Category A capital allowances might also be a factor in agreement to lease negotiations.

A rent-free period may be provided by the landlord as a notional contribution to the tenant’s fit out. It not unusual for a tenant to start fitting out their areas before completion of the shell and core works, although the rent-free period will be triggered by practical completion of the shell and core works.

The tenant’s fit out may involve rectifying problems in the developer's works. In order to meet the fit-out timetable these may be funded by the tenant who may then make a claim to recover their costs.

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The interesting point is who claims the capital allowances tax break which can be substantial as 60% of fit out costs can be the cost of mechanical and electrical services which qualify for depreciation and tax relief. Cat A capital allowances might be a negotiating factor in the agreement to lease negotiations.

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