How can you ensure tenant improvements are included in a real estate contract?

1 Identify your TI needs

Before you start looking for a space or engaging with landlords, you should have a clear idea of what kind of TIs you need for your business operations, design, and branding. You should also consider your budget, timeline, and future growth plans. Having a clear vision of your TI needs will help you narrow down your options, communicate your expectations, and evaluate the feasibility of different proposals.

2 Negotiate your TI allowance

Your TI allowance is the amount of money that the landlord agrees to contribute or reimburse for your TIs. The TI allowance can be expressed as a lump sum, a per-square-foot amount, or a percentage of the rent. The TI allowance can also vary depending on the type, scope, and quality of the TIs. You should negotiate your TI allowance based on the market conditions, the landlord's incentives, and your leverage. You should also factor in the hidden costs, such as design fees, permits, taxes, and contingencies.

3 Specify your TI terms

Your TI terms are the details and conditions that govern how your TIs will be planned, executed, and paid for. These should include the scope of work, which outlines what TIs will be done, by whom, and to what standards. Additionally, the timeline should be specified to indicate when the TIs will start, finish, and be inspected. The payment method should also be determined to determine how the TI allowance will be disbursed. Furthermore, the ownership and maintenance should be clarified to show who owns and is responsible for the TIs during and after the lease term. Lastly, a contingency plan should be outlined in case of any delays, defects or disputes.

5 Monitor your TI progress

Once your TI agreement is signed and your TIs are underway, you should monitor your TI progress regularly and communicate with the landlord and the contractors. You should keep track of the milestones, invoices, receipts, and change orders. You should also inspect the quality and functionality of the TIs and report any issues or concerns. You should document your TI progress and keep a record of all the correspondence and evidence.