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Real Estate Term of the Day – Shell Lease

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A Shell Lease is a commercial lease in which a tenant rents a property with an unfinished interior. The agreement is that the tenant will finish construction or any necessary renovations, as well as decorating and adding any furniture, fixtures or equipment. A shell lease often specifies exactly what construction the landlord and the tenant are responsible for, and often the landlord will provide a financial incentive to the renter for completing the work.

Shell leases exist in many forms, depending on the work that has already completed or what the landlord wants done. Tenants and landlords can both benefit from a shell lease, because the landlord doesn’t have to sink their own money into a property and a tenant can customize it to be exactly how they need it to be. The two most common types of shell leases are “cold” shell leases, in which the space has almost no infrastructure at all, and a “warm” shell lease, in which the property has utilities and some other features already in place.

If you are a tenant looking for a semi-permanent space that you plan on occupying for a long time, then a shell lease might be the best option for you. These agreements give you the freedom to design your office and define how your operations will be established, and you do not have to adapt to an already designed space. It is the best option if buying is not a possibility for you, but you want to make your office your own from the ground up.

Lydia Whiteford (32 Posts)


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