Unless you’ve been part of the management of a Tenant Improvement project before, you may be unsure about how to spend that money. The lease agreement will provide the guidance you need. You will find this language where improvement and alternations are discussed. Here you’ll also find the Tenant Improvement Allowance (“TIA”). The TIA is the amount of money, expressed as a per square foot price or a specific dollar amount, the Landlord will pay towards your improvements

The landlord is providing you a TIA to improve your tenant space. The landlord will want to review and approve how you spend your TIA. They want to be sure your using the money they provide on improvements to the buildingt thereore some things can’t be paid for by the TIA. But once you know the basics you’ll be able to spend wisely. The best ways to use you Tenant Improvement Allowance.

Design

As we like to say, it all starts with design. Planning your space is critical to getting the space you really need. There are lots of other elements that you’ll need in a successful project. But getting the planning and design step wrong can be disastrous. Happily, your TIA can be used for design fees. Whether you need an Architect or an Interior Designer, their fees can be paid for by the TIA.

Designers typically will charge $5-10 per square foot for their services. Depending on the size and complexity of your project these fees can vary, but you’ll find it’s well worth it.

Landlords will also appreciate your use of a designer. In fact they will likely require a designer for projects of substantial work to ensure the plans are up to local codes. In addition landlords will want to be comfortable with finishes you propose since they will inherit your space if you decide to move out in the future.

Construction

The largest portion of your TIA will be spent on the construction of your space. This will consist primarily of all the materials and labor that comprise your space. Your TIA will also fund all the support staff used by your general contractor during construction.

If you’re buiding out a space for the first time, the construction costs could be substantial. In this case your TIA will be larger. On the other hand if you’re taking over an existing space and making minor modifications, the TIA will be smaller to accommodate modest changes.

For most projects the landlord will require you to get appropriate permits from the City of other local jurisdictions. Your TIA will typically cover permitting fees and any other regulatory fees that may be necessary.

Misc.

The TIA is there to help you pay for any items you need to improve the leasehold. Therefore other fees for which you can use the TIA. Legal fees for contract negotiation, zoning and variance consulting fees, equipment planning, moving fees, etc are all things that can potentially be paid for by the TIA. Of course leases vary so you should check the language in yours. But most landlords are willing to work with you to get you in the space and paying rent as quickly as possible.

What to avoid paying for

Your landlord will be all too happy for you to pay for some items. There are spaces within the building that your TIA should not pay for if you’re careful. Avoid any improvements for which you are not going to benefit. You’re TIA should not be used to upgrade common area corridors, elevators, common area restrooms.

Some base building systems like fire sprinklers may need to be modified to make your space work. But if those systems require an upgrade, to meet code for instance, those upgrades should be the responsibility of the landlord.

What the TIA doesn’t pay for

There are items for which the TIA won’t pay. Primarily anything that is not affixed to the buidling itself won’t apply. The TIA won’t pay for things like furniture, artwork, decor and the like. Although important to the use of your space, the landlord doesn’t get a benefit of these items when you leave.

Conclusion

You must be prepared to understand how your TIA can be used. The best ways to use your tenant improvement allowance is to, focus on the core elements of design and construction. Many times landlords are open to other uses for the TIA. But in all cases be sure you are educated on what your lease says about your improvements so you can maximize this benefit.