Tenant Improvement Agreements

A tenant improvement agreement is also know as a tenant work letter.

There are three general types of tenant improvement agreements, according to attorney and author Richard C. Mallory. The type of agreement is what defines who will control construction, who will pay the cost of construction and the date of payment.

Tenant Build

In a tenant build agreement, the tenant will select and control the contractor, and is responsible for paying him. The letter outlines any agreed-upon funding from the landlord and states that the tenant will cover any further cost. The property's condition before improvements should also be outlined in the agreement.

Turn-Key

In a turn-key agreement, the tenant outlines the desired improvements as a condition of leasing the property. If the landlord accepts the agreement, he hires and pays a contractor. The improvements are made before the lease commences, on an agreed-upon completion and move-in date.

Landlord Build with Allowance

The landlord-build-with-allowance work letter states that the landlord will make improvements and spend an agreed-upon amount. The landlord chooses the contractor and the tenant is responsible for any cost beyond the landlord's payment. This type of agreement can be risky to a tenant: the quality and included improvements must be written in the agreement using exact detail, or you could be stuck with uncompleted work or large invoices.

References

• Office Times: Evolution of Work Letter Alternatives- Distinctions

Resources

• All Business: Tenant Improvements and Alterations Under Office Leases