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Rent-Free Period & What It Is

Posted by on December 13, 2021

You may have heard of the term rent-free period or fitting-out period when it comes to renting of commercial or industrial properties such as office spaces for rent or industrial spaces for rent.

However, you may note that this term is usually not applicable to residential properties.

Read on to find out what do these terms mean.

Rent-Free Period

Rent-free period may sometimes also be used interchangeably with fitting-out period or rent-free fitting out period. This period is sometimes offered to office space tenants who decide to lease office spaces which are in original bare condition and requires the tenant to renovate the office space before the tenant is able to use the office premises.

For Renovating The Office Space

As renovation for office space in bare condition is required, some landlords or owners may agree to offer the tenant a rent-free fitting out period so that the tenant has some time renovate the office space according to their company’s preference. This period is known as rent-free fitting-out period as it is free of rent during this period which means that rental is not payable.

Usually For Office Spaces Which Require Fitting Out

Most office spaces are in original bare condition as different companies have their preferred corporate colours and preferred designs when it comes to renovations. As such, landlords or owners usually require the outgoing tenant to reinstate the premises to original bare condition as the renovation done by the outgoing tenant may not be of value to the next tenant.

As for fitted office spaces, landlords may or may not offer a fitting out period. Even if a rent-free fitting out period is offered, it could be a shorter period or it could also be that the rental is high enough that the landlord is willing to offer a rent-free fitting out period. These are usually negotiable depending on the landlord or tenant and also the location and type of office spaces.

Usually More Negotiable for Longer Term Leases

Also, if your company is looking to rent the office space for maybe 3 to 5 years, the landlord may be more willing to offer a rent-free period due to the long term commitment and confidence that the tenant is here to stay for the long term.

Landlords Usually Consider The Numbers As a Whole

If you are an office space tenant and are thinking of negotiating for a very long rent-free period, you may want to consider otherwise as landlords usually look at the proposed rental rate per month, duration of lease, rent-free period as well as the profile of the tenant as a whole proposal. This means to say that although the rent-free period may be offered, the monthly rent may be adjusted higher to make up for the longer rent-free fitting out period.

Because of this, it may not be advisable to request for a long rent-free fitting out period as it may not be beneficial for your company in the long run.

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