Carefully Define 'Vanilla Box' in Lease
Q: Should I use a standard definition of a “vanilla box” in my commercial lease?
A: Yes. Forgetting to define the term “vanilla box” in your lease can lead to confusion and possibly litigation. That’s because “vanilla box” means different things to different people. It may be generally understood that a vanilla box means the “demised” or delineated space, where demising walls separating it from the common areas and other tenant spaces have been constructed. However, it may or may not include utilities and the finished interior walls, ceiling, or floor—items that can quickly get expensive for you if you must finish them.
What a vanilla box actually comprises will depend on the specifics of the lease deal and the building involved. Because there is no universally accepted definition of vanilla box, you would need to come up with your own definition to reflect your lease deal. Although some commercial owners may think that excluding a definition of vanilla box from their leases affords them more flexibility in what they must provide or allows them to avoid negotiating with the tenant about exactly what will be included, that’s a risky road to follow. Defining vanilla box in a lease gives both parties certainty of what the owner will provide, and the items for which the tenant is responsible. Without clarifying the condition in which the space will be delivered, the owner and tenant could have differing expectations, which could lead to conflict and even potential lawsuits. And that’s not the best way to begin the owner-tenant relationship.
The term “vanilla box” can be used with any type of space, from retail and industrial space to office space. Since the owner knows what will be included in the vanilla box, the owner should have its architect, engineer, general contractor, and other construction professionals put together a detailed list, including specifications, of which improvements will be provided as the vanilla box. Those improvements will most likely concern walls (separation and demising walls), ceiling, doors, electrical (including electrical outlets), fire sprinklers, floor, HVAC, lighting, plumbing, restrooms, and a store front. The list can then be attached as a schedule to the lease.
Also, although actual specifications will vary from project to project and from owner to owner, there are issues that the parties should address in any vanilla box situation. For example, they should decide, and the lease should discuss, whether the electrical will be stubbed into the tenant’s space or will end at the building’s utility room, so that the tenant must bring it to the space.
Tenants should be aware that there’s a difference between the terms “vanilla box” and “as is,” though. The lease may require the tenant to agree to take the space “as is,” in the condition existing at the time the lease was signed or at another time specified in the lease. The term “as is” means that the tenant is responsible for finding out what is and is not included in the space, and what each of the parties is expected to provide. Any misunderstanding about what is and is not included in the space is likely to be resolved against the tenant because the tenant expressly agreed to take the space in the “as is” condition. Therefore, a tenant should protect itself by speaking to its construction professionals before it signs a lease, to make sure that it understands what the space will and will not include.