Commercial lease · free guide
Tenant improvement allowance
A tenant improvement allowance (TI) is money or landlord work that helps you build out the space. It is not free. It is part of the deal economics.
The work letter matters as much as the dollar amount.
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Before ClausePrep
The broker is friendly and fast. Rent looks fine. You feel behind, like everyone else already knows the game.
After ClausePrep
You can price total occupancy cost, name the traps (CAM, guarantee, HVAC), and negotiate without apologizing for asking.
TI negotiation basics
- Get the allowance as a clear dollar per square foot or lump sum.
- Know whether unused TI is kept by landlord or credited to you.
- Define who manages contractors and who owns delay risk.
- List what the allowance can pay for (hard costs, fees, furniture).
- Align free rent with the buildout schedule so you are not paying while waiting on permits.
Disbursement traps
Some landlords reimburse only after you open, which strains cash. Others pay on invoices with retainage.
Ask for a draw schedule you can actually fund.
Scope traps
If the space needs base building work (restrooms, HVAC capacity), clarify who pays before you spend TI on finishes.
Delivery condition should match the plans you priced.
Free sample for this situation
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Questions
Is higher TI always better than lower rent?
Not always. Model cash timing. Rent reductions last the term. TI is front-loaded and may be amortized into rent.
Do I need permits for TI?
Usually yes for real buildouts. Confirm who pulls them and what happens if inspectors require upgrades.
Educational content only. ClausePrep is not a law firm and does not provide legal advice. For material decisions, consult a licensed professional in your jurisdiction.