How does it feel when you negotiate $100,000 of landlord-funded tenant improvements in your lease, you use $75,000 to get the premises ready for your occupancy, and then find out there isn’t any allowance left a year later when you have to replace the broken down air conditioning unit on the roof? You just got the shaft, dear tenant…twice!
Most leases are drafted by the landlord and so are skewed heavily in their favor. Language in the “Work Letter” – the lease addendum that addresses tenant improvement construction – typically states that the landlord allowance is for construction and improvements to the premises that relate to the initial space plan and that are performed prior to the lease commencement date; in other words, “use it” for only this work and within this time frame “or lose it”. Most tenants and many inexperienced or oblivious real estate brokers don’t give this much thought. The tragedy is that most landlords don’t even pay close attention to this detail; that is, until the tenant surprises them down the road with a request for funding for subsequent improvements, and then they turn the tenant down flat.
I’m giving away a valuable trade secret here, so pay attention! Try deleting the language that puts time restraints – direct or implied – on the use of tenant improvement dollars provided by the landlord. It is amazing how infrequently I find landlords rejecting this change to the lease. The poor soul at the top of this article could have been $25,000 to the better if his broker had done this for him!
There are other improvements that the typical Work Letter states cannot be paid for by the landlord’s tenant improvement allowance, including furniture, fixtures and telecom systems. These too can be negotiated in your favor by a savvy, experienced broker.
A good tenant advocate knows that everything in your lease document is negotiable