When leasing commercial office space to house your business,
you may be lucky enough to locate a space that is just perfect for your needs
without a single change. That, however, is not usually the case and changes
may be required to fit the office space to your specific requirements. Before
beginning any negotiations, it is important to understand two key terms:
(TI): This term refers to the construction or remodeling of leased
commercial real estate that are made to accommodate the needs of the lessee.
This could include adding or removing interior walls, signage, lighting,
wiring, flooring, or other changes needed. The cost of these changes is
negotiated between the landlord and lessee and agreement must be reached as to
which party will pay for exactly what expenses.
This is a written legal document negotiated between the landlord and lessee
that outlines exactly what office building standards are used in any TI construction
and the number of items supplied in the leased space such as light fixtures,
power outlets, and other items required to make the space suitable for the
lessee. The document also outlines how much the landlord will pay and what
financial responsibilities on the part of the lessee may be.
TI Workletter Issues:
The Tenant Improvement Workletter may include:
descriptions of the TIs to be built
design process to be followed
or other parties that will perform the TIs
will pay for what improvement
clause regarding changes the tenant may want to make after initial design
of what happens if TI work delays result in impacts to the tenant move
Scope of Work and
Changes in Scope
The landlord’s architect, planner or designer prepares plans
and specifications defining the TIs to be performed. Because the landlord
likely owns the entire building, he or she will control this work because of
potential impact of the TIs on the building or building infrastructure. The
tenant should be consulted and involved in the process and a time schedule
should be agreed upon. The landlord may agree to pay for certain basic
improvements but if the tenant wants to make upgrades from the building
standard, the costs will be levied on the tenant. Tenant requested changes are
usually paid for by the lessee. If the lessee requests changes in mid-stream,
the change in scope will be at their expense and may impact the move in date
without any penalty on the part of the landlord or construction team.
The landlord will normally be the party in charge of
obtaining bids for agreed upon changes, selecting the contractor and obtaining
permits, as well as managing the work and ensuring that as-built drawings are
prepared. However, should the tenant be permitted to perform the TIs, he or she
will be required to take care of all items above plus obtain payment and
performance bonds and obtain lien waivers from all parties working on the
commercial office space.
Payment for Tenant Improvements
The workletter must specify exactly who is responsible for paying for the
TIs and how much will be paid. In some cases, the landlord will agree to a
“turnkey” TI where all costs are absorbed by the landlord for the initially
agreed upon improvements. Leases commonly provide a tenant improvement
allowance stated in an amount per square foot rented and in this case the
landlord pay the allowance and the tenant pays for all improvements. The
workletter must outline exactly what the allowance can be used for such as
planning, permits, and construction, as well as what can not be upgraded with
the funds from the allowance, often items such as telecommunication wiring,
trade-specific fixtures, and equipment.
This portion of the workletter should address exactly what happens if the
facility is not ready for tenant occupation by a defined move in date. Usually
the landlord does not have any financial liability because of late delivery and
the lease normally remains in effect during any delays. If the delay is caused
by the tenant, there is no reduction in rent due. However, the tenant should
pay close attention to workletter clauses regarding delays and negotiate a
better outcome if the delay in work is not their fault. There may be consequences
negotiated into the workletter that result in contractor penalties or rent
abatement if the delays are in no way caused by tenant delays or tenant
requested changes of scope.
This is one of the areas that a good tenant representative will take the lead on assist you. Understanding the 'norm" in your are is important to make sure you get as much of an Office Space Tenant Improvement allowance as possible.
you are considering leasing an office warehouse space or any space for that
matter, you want to go in to it with eyes wide open. The following will help you understand what
to consider and hopefully help make your experience with leasing space a better
Students of history recall the stories of the landlord abuse that
occurred in the late 1800’s/early 1900’s when tenant farming, mining towns and
tenant exploitation were common.
Fortunately, these situations have been largely extinguished in the US, but
adversarial feelings between landlord and tenant remain. Is landlord abuse prevalent today when
leasing space? Are they truly ogres? Or does the modern media sensationalize a
few occurrences to feed this perception?
In our experience, most landlords are reasonable and fair.
However, since they know the tools of the trade, often they get the upper hand
in the lease agreement and structure contracts to their advantage. Many tenants, surprised by requirements of
their lease after they move in, develop an “us vs. them” attitude.
Tenants can level the playing field by taking a few minutes to
unravel the “legalese” of the lease agreement before signing. Often a 20+ page document, however, makes
this a daunting task– unless you know what to look for.
Here are 4 costs that some landlords quietly shift to tenants and
what tenants can do to protect themselves:
Check the lease for the term “base rent.” If you find it, the lease you
are about to sign is a “triple-net lease” or NNN Lease. This type of lease requires the tenant
to pay for all of the expenses to run the property (such as property tax,
insurance, exterior painting, etc.). If any of these expenses increase,
it’s the tenant that pays more, not the landlord. If the building is painted or the
asphalt is replaced, once again, the tenant pays the bill. And the worst
part? The tenant doesn’t get to vote.
It’s not a HOA.
Tenant Protection: Sign a “gross lease” vs. a NNN lease. Gross leases require the landlord to pay
the property operating expenses. If
a gross lease is not available, negotiate limits to NNN expenses into your
Maintenance Costs: [Skip this
section if your lease says “Full Service Lease.” Full Service Leases are
typical of office buildings.]
Most leases require tenants to maintain everything inside of their
space at their own cost. Maintenance can include bath fixtures, light
fixtures, carpet, drywall, etc.
Tenant Protection: The easiest way to avoid these costs is to lease space
at newer properties. Prior to
move-in, request a walk-through with the property manager to document any
defects in writing and with photos.
Responsibility for utility costs varies from landlord to landlord. Ask
questions to determine who pays for what. The cost for
electricity/garbage/water may be included in the rent at one property but
not at another.
Tenant Protection: A good understanding of the utility costs is required
to get a true “apples to apples” comparison of the cost to lease different
spaces. It also prevents an
unwelcome surprise after you move in.
No one wants an unexpected $300/mo. utility bill!
Heating and cooling systems are big ticket items. Once again, treatment of
HVAC costs varies. Find out who is responsible for maintenance and major repairs/replacements.
Maintenance may be only a few hundred dollars per year, but a replacement
can cost over $5,000.
Tenant Protection: Negotiate a limit on contributions to HVAC repairs -
$500 per year for example. Check
replacement language – it isn’t uncommon for tenants to receive a $3,000
bill for a replacing a 15 year old system when they’ve only occupied the
space for two years.
Again, most landlords are fair.
If you are billed for an unexpected expense, contact your landlord. Compromise may be possible. Often, they aren’t the ogres they are
reported to be.
"These regulations apply to all private and state and local government
employers with 15 or more employees, employment agencies, labor
organizations (unions), and joint labor-management committees. The Amendments Act retains the ADA's basic definition of “disability” as
an impairment that substantially limits one or more major life
activities, a record of such an impairment, or being regarded as having
such an impairment. However, it changes the way that these statutory
terms should be interpreted in several ways, therefore necessitating
revision of the prior regulations and interpretive guidance contained in
the accompanying “Appendix to Part 1630—Interpretive Guidance on Title I
of the Americans with Disabilities Act,” which are published at 29 CFR part 1630 (the appendix)."
"Both public comments and comments received during the inter-agency
review process under EO 12866 highlighted a variety of limitations in
our analysis. Indeed, the alternative that we later present indicates
that the figure of 8.2 million people with disabilities used in the
preliminary analysis significantly underestimated the number of workers
with impairments whose coverage under the law will now be clarified."
"Thus, based on this data, the number of individuals with the impairments
cited in § 1630.2(j)(3(iii) could be at least 60 million. In addition,
we know that people with many otherimpairments
will virtually always be covered under the amended ADA definition of an
impairment that substantially limits a major life activity or record
"If we assume 64% of individuals with these disabilities are in the
labor force, then the number of labor force participants whose coverage
is clarified under the ADA is approximately 38.4 million."
"The most recent JAN study, issued September 1, 2010, reported a mean accommodation cost of $1,183, based on 2009 data.Show citation box
estimates of both the mean and median cost of accommodations, the
preliminary analysis estimated that the ADA Amendments Act and these
regulations would result in increased costs of reasonable accommodation
of from $19,000,000 to $38,000,000 annually."
For more information visit The Job Accommodation Network (JAN) - the leading source of free,
expert, and confidential guidance on workplace accommodations and
disability employment issues. Working toward practical solutions that
benefit both employer and employee, JAN helps people with disabilities
enhance their employability, and shows employers how to capitalize on
the value and talent that people with disabilities add to the workplace.
Saving money in operating your office is always a plus and there may be ways you can save a lot with little effort that you may not have thought of before. Even small savings add up over time and can really make a difference in your bottom line over the course of a year. Here are some ways that you may find fit perfectly into your business that make sense for saving dollars:
Print Responsibly: It costs money to print; paper costs money and uses up resources even if you choose recycled paper. Do you print every version of a contract or document, even when you know there will be several more versions before document signed off? You can red-lined and add comments using these functions built into all of today’s word processing software and it is much more efficient than hardcopy and red pen mark ups. It’s even more cost effective using electronic mark up because corrections and changes can be accepted or rejected by the document owner automatically rather than being retyped. Print only those documents needed for maintaining legally required files, customer contracts, and important reference documents you will use often. Any reference document you will only refer to only occasionally should be stored on your computer or network server and accessed as needed. Not only do you save money but also the number of trees being cut for paper products is reduced, reducing your organization’s environment footprint.
Right Source Labor: Overtime for employees is expensive and sometimes really isn’t welcomed by the employee needed for more than 40 hours when projects pop up needing attention. Employee burnout is always a problem and asking for extra hours can add to this problem. Of course, only trusted long-term employees can perform many of the tasks in your business, but temporary or part-time workers can easily do others. Hiring temporary labor from agencies can be nearly as costly as asking your employees to work overtime. Maintain a list of local freelance workers who can be called in for periods where routine tasks must be performed. Examples include preparing mailers and applying mailing labels, entering data into spreadsheets, copying and collating handouts for seminars and presentations, and there are many other tasks you’ll have based on what your firm needs. Often, you will find some of your employees have teens who would love the chance to earn a bit of extra money by working a few hours as needed. You can find temporary staff by posting on Craigslist.org for your area. A freelance worker working virtually from a location other than your office may easily do some tasks, such as entering data into spreadsheets from another online source. Save expensive overtime costs for when you really need their expertise during extra hours.
Right Size Travel Expenses: Sometimes you simply must travel to attend a meeting or seminar. Perhaps you must visit an important client in another city. But most company travel budgets can be trimmed significantly if technology is used effectively. Invest in good quality video teleconferencing equipment and, for the cost of one or two meetings in another state, you can hold meetings face to face with people around the world forever. The equipment today is affordable and allows people to feel as if you are sitting at the table with them, even if you are in another continent. Even if you do feel a human presence is essential at the client’s site, when you do need to travel you can often reduce the number of people that go on the trip, combining video conferencing with on-site representation. You’ll recoup the investment in any equipment you purchased and the additional savings will amaze you after only a short time.