If you are a new commercial tenant, you may be unfamiliar with the tenant improvement allowance. However, this allowance is a standard and very important part of a commercial lease or agreement, and you need to be familiar with the allowance and what it can do for you as a tenant.

A tenant improvement allowance is negotiated to ensure that a tenant can improve and alter the commercial space, as needed. Establishing such an allowance means that the landlord will agree to pay a certain amount to cover these improvements and alterations so that it does not have to come out of your own funds as a tenant.

But because a tenant improvement allowance requires establishing a fixed sum of money to cover all of the expenses that the landlord is willing to pay for, you must go into negotiations of the tenant improvement allowance with a good sense of what kinds of improvements or alterations you will want to make. This will ensure that you negotiate enough funds to cover any changes you wish to make to the commercial property.

Knowing in advance how much allowance you will want for your improvements will give you greater bargaining power when you sit down with your landlord, so be sure to consider the following things when estimating your desired tenant improvement allowance:

• Whether you expect to have more clients or customers than space can handle
• Whether the rooms and hallways are laid out in a way that suits your business needs
• Whether you are happy with the style and color of the walls and carpeting
• Whether the plumbing and electricity will need updates during your tenancy

If the landlord is not willing to give you the full amount of the tenant improvement allowance that you desire, make sure you know what your priorities are and if you are willing to pay for any of the improvements yourself.

Also, be sure to include in your tenant improvement allowance agreement how you want the landlord to go about any improvement projects you desire. Specify how the landlord should go about contractor bidding and hiring, as well as the timeline you desire for your improvement projects.

Finally, when it comes time to make the alterations and improvements you anticipate, do not hesitate to use the tenant improvement allowance and ask your landlord to begin the process. By putting the allowance into a written and signed agreement, your landlord is legally bound to provide you with the allowance that was agreed upon. If the landlord refuses, consult a lawyer to ensure that your rights are protected.

A tenant improvement allowance can be a valuable and critical part of negotiating a commercial lease, so make sure that you have considered and planned for future improvements and alterations before signing a lease with your landlord. This will ensure that you can afford to improve the property as you want to without spending your own hard-earned money.

Relevant Resources:

• Top 5 priorities during tenant improvements : Commercial construction
• How to Choose Right Tenant Improvement Contractor in San Francisco?