Tenant Improvement Rights You Should Have

In this article, you'll learn:

Key differences between major and minor alterations and how to protect your rights.
Why it's important to avoid hidden fees and ensure unused funds are applied to rent.
The value of staying involved in the improvement process from the start.

It's rare to find an office space that is ready for you to move into and exactly ideal for your company. That's why most offices undergo some improvements and modifications. To ensure that you're able to transform your office space into the very best setting for your team, keep these tips in mind:

1. Know What You May Want to Improve

Before you even begin to discuss tenant improvements with your landlord, take the time to tour your space and consult with your team about what requires improving. Think about how well the layout of the space will work for your employees and if it provides the right mix of open, semi-private and private offices. You'll also want to consider the wiring, the decor, visitor and reception areas, the ceiling, the flooring and the lighting.

2. Go Into Negotiations With a Number in Mind

Once you have a wish list of improvements, do some research to find out the approximate cost of the upgrades and modifications. This way, you will have some idea of how much money will be required, allowing you to negotiate with the landlord from a knowledgeable position.

3. Understand the Difference Between Major and Minor Alterations

As you analyze the lease, you may find that you are allowed to make minor alterations at your own expense without getting the landlord's approval. Typically, minor alterations are those that do not impact other tenants, have no impact on the property value, do not require permits or vacancies and have no bearing on the structural integrity of the building. Make sure that what the landlord means by minor alterations is clearly spelled out in the contract to avoid problems in the future.

4. Be Wary of Landlord Supervision and Overhead Fees

In some cases, tenant improvement allowances may include something called a "landlord supervision" or an "overhead" fee. This fee is often equivalent to 3 to 5 percent of the construction budget and greatly increases costs. You can fight to have this fee decreased or removed entirely. If the fees are not mentioned, request to have language that states that no such fees will be charged to the contract.

5. Protect Yourself From Losing Unused Funds

Most often, tenants end up having to pay for some of their improvements out of their own pockets as the tenant improvement allowance does not provide enough funds for everything; however, in the event that there is money left over, your contract should spell out what will be done with the proceeds. Specifically, ask to have unused funds applied to your rent.

6. Reserve the Right to Stay Involved in the Process

Make sure that the alterations and improvements clause gives you the right to remain in the loop during the planning process. This way, you can have a say in which contractor is chosen for the work and can be certain that you're receiving a fair price.

7. Don't Put It Off for the Future

If you're in a hurry to move in, you may think that you can request improvements in the future and make do with the space as it is in the short term. Unfortunately, it can be very difficult to request improvements under an existing lease. It's best to get the work done upfront and be certain that you'll have the right space for your needs.