In the contract (or lease agreement) between tenant and building owner, there are often allowances for tenant improvements. Tenant improvements can be structural or cosmetic changes made to improve a commercial space to fit the needs of the current tenant in order to operate their business most effectively. Tenant allowances are specified in the lease contract and specify what the property owner will pay toward the improvements or changes to the leased space. This will vary depending on the lease period and other factors.
Turn Key Build-Out & Stated Dollar Amount Tenant Improvements
There are two types of tenant allowance agreements. The first is called a Turn Key Build-Out tenant improvement. In this type of agreement the property owner pays for the improvements. In a Stated Dollar Amount tenant improvement agreement, the tenant is allocated funds for which to use on building improvements. This type of agreement usually allows the tenant more control over the improvements that are being made to a building. The type of agreement made between landlord and tenant happens on a case-by-case basis and takes into account the desires of each party. It’s important to communicate with your landlord or tenant in order to discuss and come to a fair agreement, on any improvements that need to be made to a property.
The TI allowance in a Stated Dollar Amount agreement may or may not cover the actual costs of the desired improvements. If the costs will exceed the TI allowance, the additional costs will be paid by the tenant, which is an expense that must be considered ahead of time by the business owner.
Tenant & Owner Improvement Agreements
A landlord should offer the option for tenant improvements on a commercial property so that business owners can use the space for their specific business purposes. Lessor and lessee must come to an agreement on how these improvements are to be made.
The Importance of Tenant Improvements
It is vital to understand the need for tenant improvements. For example, a tenant may need to convert a space that was once used as a coffee shop to a full-service restaurant. Or, a bookstore may need to become an office building. The nature of these businesses are very different and have different structural and spatial needs as well as building code requirements. No matter what type of improvements you need to make, Bespoke Builders will work with you to make sure all of your needs are met and your business is able to take full advantage of its space.