One of the perks you may receive by a motivated landlord who wants a signed office lease is a tenant improvement (TI) allowance. Office lease services agree that these allowances can be an important feature in making a lease more desirable and affordable. Yet it is critical to understand what is really being offered before you should count on this kind of concession.
Before agreeing to the terms of any TI allowance, office tenant reps advise going over the terms very carefully so you understand what to expect.
What Is A TI Allowance?
A TI or tenant improvement allowance is money for improvements that a landlord agrees to reimburse once a tenant signs an office lease. It often covers a portion of the improvements required by a tenant to move into a new leased space.
TI allowances sound simple enough; however, experienced office tenant reps stress the importance of clarifying all details in advance or end up footing the entire bill for any improvements.
Are Problems with TI Allowances Common?
One common misconception many people have is that a TI allowance is a cash advance paid by the landlord to the tenant at the signing of a lease. Office lease services say this is incorrect. TI allowances are reimbursements made to a tenant after improvements have been completed.
More importantly, in order for you as the tenant to actually be reimbursed from the landlord, improvements must be made in accordance with all conditions and details outlined in the lease. Due to misconceptions on how this money is paid, many tenants do not get paid because they do not adhere to the conditions.
Clarify TI Allowance Details In Advance
The best advice office tenant reps can offer regarding the negotiation of any office lease is to always discuss any TI allowances in detail and in advance. Understand which items your landlord considers as covered improvements and which are not included. This is especially critical when working with raw space that lacks certain finishes, such as ceilings and light fixtures.
These would not be considered improvements on already finished spaces. Yet by giving you choices in finishing these spaces, some landlords may try to call them just that. In this type of situation, you could spend half of your allowance on improvements that would otherwise be provided in another lease situation.
The initial allowance per square foot may seem reasonable at first; however, office lease services warn that TI allowances that list necessities as improvements could change this circumstance very quickly.
Although a TI allowance may be an attractive part of any office lease, you should avoid signing any agreement without examining it further with your office lease services. Experienced office tenant reps can fully examine any offer made to decide if it fulfills your needs and expectations. Reading between the fine lines will give you more negotiating power and avoid the unplanned expenses or surprises that can affect your profit margin!