Tenant Improvements and Alterations of an Office Leases

DATE: 2006-10-19

Most form leases provide that the tenant can't make any alterations or improvements to the premises without the landlord's consent. Those provisions are typically too restrictive and you should attempt to negotiate changes. For example, try to get the right to make non-structural changes or changes costing less than $2500 without the need to obtain the landlord's consent.

Before you can occupy the space, the premises may need some improvements or alterations to make it appropriate for your business needs. Here are some key questions to answer about the initial tenant improvements and alterations:

What is the scope of changes?
What is the cost?
How much time is needed to complete the improvements?
What permits or approvals will be necessary?
Will the landlord contribute to the payment for the improvements?
Who will own the improvements once the lease is terminated?

Try to get a clause stating that you are allowed to remove any trade fixtures and alterations that you pay for, provided that you repair any damages to the premises.

If you anticipate the need to make alterations or improvements in the future, the lease should provide that you may make them with the landlord's consent, but that the consent won't be unreasonably withheld or delayed.

Also, be aware of the clause that says that at the end of the lease you have to return the premises in their original condition. Try to negotiate a clause that states the following:

The premises will be returned to the Landlord at the end of the tenancy in the same condition as at the beginning of the tenancy, excluding (1) ordinary wear and tear, (2) damage by fire and unavoidable casualty not the fault of the Tenant, and (3) alterations previously approved by the Landlord.

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