We often act for clients who either have spent huge amounts of time and energy finding new offices, have carefully negotiated the lease documentation but then fail to spend any time checking out the fit-out contractors and the fit-out contract itself; or they sign the fit-out contractors’ standard terms and conditions without checking them. Not surprisingly, these terms and conditions are drafted from the fit-out contractor’s advantage! Here are our seven top tips for making sure that your fit-out proceeds with a minimum of problems.
- Check out the scope of works
- Get your lawyer to check the fit-out contract
- Consider using a project manager
- Contractors insolvency
- Don’t change your mind
- Think about furniture
Most people use a contractor to do the design and the build or – commonly where it is a major fit-out - use an architect or other professional team to carry out the design element.
A good fit-out contractor will help their client develop their own requirements e.g. open plan, meeting rooms, kitchen, breakout area and the acoustic and lighting requirements etc. The contractor then puts together a proposal based around what the client wants to spend per square foot. In this case, you should expect to use this for the Joint Contracts Tribunal (JCT) design and build contract.
However, if you are using an architect and professional team for the design element, it would be appropriate to use the JCT design and build contract to engage a fit-out contractor.
In neither case should you be simply signing the fit-out contractor’s own fit-out contract.
Even for small offices, fit-out contracts can cost in excess of £200,000/£300,000.
Regardless of the form of fit-out contract you are using, do make sure that you pass it to your Lawyer to check before you sign. Even if the contract is not biased towards the fit-out contractor, you do need to be certain that you understand the timing and delivery date the contractor is promising, and what happens if the works are done properly or if there is a disagreement as to whether they have been completed.
If you are carrying out a major fit-out (as a rough rule of thumb something in excess of £1 million) it is always worthwhile using a good project manager to run the construction for you. This is even more pertinent if you are not familiar with construction works, have little construction experience and/or are under pressure in the “day job”.
Insurance on fit-out contracts can be very complex. Check with the landlord before the fit-out contractors go on site to see what the landlord’s insurance will cover. Likewise, make sure that you understand in the fit-out contract what the building contractors insurance will cover.
Make sure there is no mismatch between the two.
If your contractor becomes insolvent during works you will have a major problem - both in terms of the timing interruption and the fact that by paying in advance you may be out of pocket.
So make sure payments are done in stages and be very wary of what is known as ‘front loading’ where the contractor invoices the tenant, in value terms, more than the work done to date is worth.
Consider taking out a performance bond which is a type of insurance policy that in the event of the contractor defaulting will pay out 10% of the contract sum.
Also, very carefully investigate the credit worthiness and track record of the contractor.
Carefully consider what your fit-out should include and make sure the specification you agreed with the contractor is carefully thought out. If you change your mind as to what you want during the fit-out contract, you will be charged extra for the contract variation. This is where contractors really make money.
Make sure you completely ‘nail down’ the design at the start, rather than rushing the contractor to get on site as soon as possible.
In a 12 week fit-out, moving at lightning pace, there will not be time for you to spend time choosing carpets, furniture etc. during the fit-out.
Most fit-out contractors will usually offer a “furniture service” as well but they will insist they are done under a separate contract.
This is because, if there is any delay in the arrival of furniture, this will inevitably delay practical completion. As a result, the contractor is left with the liquidator damages bill.
Contractors get around this by putting small print in the furniture contract saying they are not responsible for late delivery. Because this contract is separate from the building contract they can still hand the building over (because it’s practically complete) and, therefore, avoid liquidation damages. But you cannot move in because you have not got any furniture. Be aware of this.
You should also be very wary of buying furniture direct because of the extreme level of coordination required with the contractor. The design of desks and furniture will dictate where the floor boxes go and the last thing you want is the floor boxes in the wrong place.