A new commercial lease can be executed long before the owner receives base rent. Delivery conditions and commencement provisions determine when the space is ready, what work remains, when the term begins, and when payment is required. Investors must connect those conditions to construction, approvals, leasing costs, and available cash.
The essential distinction is between a projected date and an achieved contractual milestone. A business plan relying on January rent cannot treat January as certain if work, approvals, or delivery remain unresolved. The investment needs a documented schedule and a funded delay case.
Separate the dates the lease uses
Identify execution, access for planning, early entry, delivery for construction, substantial completion, lease commencement, rent commencement, opening, and expiration. Some may coincide; others may be months apart. Define each using the actual agreement.
Early access may let a tenant measure or install equipment without starting all obligations. Delivery for construction may occur before legal occupancy is possible. A lease commencement can precede base-rent commencement if free rent applies. Avoid using one field named start date for all these events.
A filed lease ties its commencement to defined readiness and separately addresses tenant-caused delay. The example demonstrates how conditions can determine dates; it supplies no universal Chicago rule. Filed commencement provision.
Translate the work letter into responsibilities
List base-building work, tenant improvements, design, permits, utility changes, equipment, inspections, certificates, and commissioning. For each, identify who performs, who pays, who approves, and what evidence establishes completion.
Clarify which work can remain on a punch list without preventing the contractual milestone. A minor cosmetic item and an inoperable building system are not necessarily treated the same way. The lease’s definition and professional interpretation determine the legal outcome.
Review change-order authority and cost overruns. A landlord allowance is not always a commitment to deliver all desired improvements for that amount. A turnkey obligation can expose the owner differently. Keep the delivery standard aligned with the approved construction scope.
A second filed lease provides a detailed substantial-completion definition and tenant-delay framework. It is useful as an original-source illustration of the issues a work letter must address. Filed work-letter example.
Hypothetical rent-start timeline
Assume a 6,000-square-foot office lease is signed June 1. The owner expects to deliver for construction July 1, complete work September 30, and start the lease October 1. The tenant receives three months of free base rent, so full base rent begins January 1. Annual base rent is $180,000, or $15,000 monthly.
The owner’s budget includes $240,000 TI and $45,000 commission. It also expects $6,000 monthly of unrecovered operating carry from July through December. The initial simplified funding requirement is $240,000 + $45,000 + $36,000 = $321,000, before debt service and other property cash flows.
Now suppose completion moves to December 31 and the three-month abatement shifts with commencement. Full base rent begins April 1. Additional carry is $18,000. Relative to the original first-quarter expectation, the owner also receives $45,000 less base rent. The combined first-quarter cash deterioration is $63,000 before other effects.
Do not subtract free rent twice. The delayed rent schedule already shifts the receipts; the $45,000 compares the revised schedule with the original forecast. A separate concession line should not repeat the same loss.
Find the longest dependency chain
Construction completion may depend on design approval, equipment procurement, access, utility capacity, permits, inspections, and tenant decisions. Identify the sequence that actually controls delivery. A short physical installation can still have a long lead time if equipment is unavailable.
Ask the project team to distinguish committed dates from estimates. Obtain a schedule with responsible parties and supporting assumptions. Identify float and what happens if one approval slips. Update the owner’s cash forecast when the critical path changes.
Do not rely on a general statement that the contractor can finish quickly. The useful evidence is a defined scope, procurement status, labor plan, access agreement, and approval sequence. For a Chicago-area property, verify the actual municipal process and premises rather than importing a generic calendar.
Tenant delay needs evidence and administration
A lease may adjust commencement when tenant actions delay completion. Read the definition, notice requirements, causation standard, and permitted consequences. Qualified counsel should interpret whether a specific event qualifies.
Record design-submission dates, approvals, change orders, access events, and correspondence. An owner cannot safely assume every late tenant response automatically produces rent. The actual agreement may require notice or demonstrate that the event affected completion.
Conversely, the tenant may dispute a deemed date if required landlord work was not ready. Separate legal entitlement from expected cash collection. A disputed invoice does not solve the owner’s immediate funding need.
Approvals and building systems can define readiness
Confirm who obtains occupancy-related approvals and what evidence the lease requires. Determine whether essential services, access, elevator operation, utility connections, and life-safety work must be functioning. Do not equate a contractor’s final invoice with legal or contractual readiness.
A filed lease example includes an occupancy sign-off, commissioned systems, delivery, and an architect’s certificate within its completion framework. These are that agreement’s conditions, not a checklist establishing compliance for another property. Filed completion conditions.
For a proposed change of use, obtain the relevant professional review early. Restaurant, medical, childcare, office, and industrial operations can require different building capabilities. A higher rent does not compensate for a delivery promise the property cannot satisfy within the funded plan.
Review the outside date and remedies
Identify any outside delivery date, extension for specified delays, rent credit, termination option, or limitation of liability. Read whether termination requires a notice within a window and whether later completion affects the right. Do not assume missing an estimated date has the same consequence as missing an outside date.
Some leases provide concessions rather than termination for a defined delay; others have different structures. Counsel should interpret the actual remedy and any interaction with force majeure, tenant delay, or casualty.
Model the economic consequence separately. A rent credit can delay cash further, and a terminated lease can leave the owner with specialized improvements and a new marketing period. The investment must identify how those costs are funded.
Financing must support the path to commencement
Review lender requirements for recognizing an executed but uncommenced lease. Ask about reserves, TI reimbursements, approval of work, lien documentation, and conditions for releasing funds. Do not assume a stabilized loan advance is available before stabilization.
Calculate peak cumulative cash deficit, including interest, debt service, other tenants’ cash flow, and the timing of tenant contributions. A $300,000 reserve may be insufficient even when total leasing costs are near $300,000 if ordinary property cash flow turns negative during the delay.
If refinancing is planned at rent commencement, stress a later date and lower recognized income. The owner should have a fallback that does not depend on the project meeting every optimistic milestone.
Document the actual commencement
Once the milestone occurs, obtain the agreement’s required commencement memorandum or confirmation. Reconcile commencement, abatement, escalation anniversaries, expiration, deposits, and option deadlines. A wrong initial date can cause errors for years.
Update the abstract, rent roll, billing system, owner forecast, lender reporting, and insurance information as appropriate. Retain completion evidence and the final work scope. Track remaining punch-list work with responsibility and deadlines rather than let it disappear when rent starts.
If parties disagree on the date, identify the dispute explicitly and seek professional resolution. Do not let the billing system’s default date become the only record of the owner’s position.
A delivery decision sheet
Before approving the lease, show the required milestones, party responsibilities, realistic timeline, contractual consequences of delay, total owner cost, peak funding, and contingency. Confirm that the lease and work letter describe the same bargain the investment committee approved.
During execution, report achieved milestones separately from projected ones. A signed contract, ordered equipment, inspected work, and legally usable premises are different stages. The owner needs that distinction to make funding and leasing decisions.
A dependable rent-start forecast comes from a deliverable space, a clear contract, a managed project, and sufficient cash. The investor should be able to explain all four before treating future rent as the basis for value or financing.
Require evidence for each forecast milestone
A useful delivery tracker has distinct evidence fields: approved drawings for design completion; executed orders and expected receipt for long-lead equipment; inspection or professional certification for technical completion; required approvals for legal occupancy; and the lease-required record for commencement. The appropriate evidence depends on the project and documents.
Avoid changing a milestone to complete because its forecast date has passed. A procurement item expected October 1 but not received remains open, and its effect on the schedule should be reforecast. Similarly, a contractor’s assertion that work is substantially complete needs to be assessed against the contract’s definition and the relevant professional review.
For a hypothetical $15,000 monthly rent, an unrecognized two-month shift creates $30,000 of forecast error before carry or financing. A short weekly exception list can therefore be more valuable than a detailed construction report that never updates the owner’s expected cash date. The tracker should connect achieved evidence to financial consequences.