Tenant Improvement Allowance & Fire Protection
What is tenant improvement?
Tenant improvement is when a commercial tenant gets a new lease and needs to renovate the space to work for his or her business. Tenant improvement is in the lease under a clause called “Improvements and Alterations.” In general, landlords give a tenant improvement allowance (TIA). This amount will tell you how much money the landlord is willing to spend on the tenant’s improvements. The landlord pays the contractor directly, and anything over the pre-determined tenant improvement allowance needs to be paid for by the tenant.
How do you manage the tenant improvement allowance?
The best way to negotiate the tenant improvement allowance is to know how much your renovation will cost beforehand. That way you can negotiate with real numbers. Keep in mind, the landlord has no incentive to stay within this allowance, so tenants should manage the construction themselves and just send the invoices to the landlord to pay. If the tenant pays the invoices themselves, it can cause tax issues.
If the tenant manages to stay under budget with the TIA, the balance will credit the first month’s rent. Tenants should be sure to track expenses, and payments made to ensure they’re getting the full allowance.
Tenant Improvement Fire Protection
Each year, businesses that did not have fire sprinklers or did not have adequate fire protection went out of business from a fire. Statistics have shown that 50% of companies that experience a fire never re-open, and another 20% close within three years because they never fully recovered.
Make sure that fire protection is a part of your tenant improvement allowance. When you open a business, it’s exciting. Don’t let that dream go up in smoke because the building isn’t adequately protected from fire.