What rent commencement conditions depend on construction completion or permitting?

In industrial leases—especially build-to-suit (BTS) or ground lease arrangements—rent commencement is typically tied to specific construction milestones and permitting conditions. These conditions protect tenants from paying rent before they can legally and operationally occupy the premises, and ensure landlords deliver a compliant, usable facility.

Below are the common rent commencement conditions that hinge on construction and permitting status:

1. Completion of Core Construction Milestones

• Rent generally starts only after the substantial completion of:
  
  • Foundation and structure
    
  • Roofing and external cladding
    
  • Internal flooring, loading bays, and utilities
    
• A completion certificate from an architect or engineer is often required.
  
• Purpose: Ensures the tenant has a physically occupiable building before financial obligation begins.

2. Obtaining Occupancy Certificate (OC) or Completion Certificate (CC)

• Rent commencement may be conditional on:
  
  • Formal issuance of an Occupancy Certificate by the local authority
    
  • Certification that the building is fit for the intended industrial use
    
• Why It Matters: Legal possession cannot be granted without OC/CC in many jurisdictions; tenants avoid non-compliant occupancy risks.

3. Availability of Minimum Utilities

• The lease may specify that rent starts only when:
  
  • Power, water, drainage, and fire safety systems are functional..
    
  • Connectivity to external infrastructure (e.g., roads or common STP) is complete. Te.
    
• Typical Language: “Rent shall commence upon the later possession or readiness of basic services.”

4. Statutory Permits or Regulatory Approvals for Use

• For regulated industries (e.g., pharma, food, chemicals), rent commencement may be deferred until:
  
  • Tenant secures Consent to Operate (CTO) from the Pollution Control Board.
    The building is inspected for EHS compliance, zoning adherence, or factory licensing.
    
• Shared Responsibility: The Landlord may be required to facilitate or provide documentation for the tenant’s licensing process.

5. Fit-Out Period or Rent-Free Window Post-Handover

• Even after possession and OC, many leases offer:
  
  • A fit-out period (e.g., 30–90 days) for the tenant to install equipment and prepare operations
    
  • During this time, rent may be waived or reduced..
    
• Purpose: Supports tenant onboarding without the immediate cash flow burden, but still reflects construction completion.