What is a tenant improvement allowance?

40521412 - lease agreement with pen document is mockupIf your law firm is looking for office space, one item you want to familiarize yourself with is the Tenant Improvement Allowance.  This is often referred to as TIA.  This is an allowance given to the tenant by the landlord to build-out office space.

For many office leases, TIA might not be that important.  This would be true in cases where the office space really does not need many renovations to fit the needs of the law firm.  For example, with some office space, it might be configured in a way that already fits the needs of the law firm.

But in other situations, that might not be the case at all.  With certain office space, walls may need to be moved.  The overall layout of the office space may need to be changed.  Kitchens may need to be refurbished.  Or, maybe a custom receptionist desk is needed.

In these situations, TIA is critically important because items like these can be very expensive.  And this can result in is the law firm paying a lot of money out of their pocket to build-out the space if they are not careful.

In these situations, it is critical for most law firms to work a commercial real estate agent who is familiar with the landlord, and the area, in terms of what kind of TIA is customary in the area.  Law firms want to make sure they get the most TIA possible to get the space up to their needs.

It is also important to make sure you get estimates from a contractor as well.  If these estimates can be obtained prior to signing a lease with a designated TIA, this can be helpful.

Law firms also then need to be able to prioritize what they really need to make the space work and what facets might be optional.  In certain circumstances, a law firm might not be able to make all the improvements they desire with the TIA they are given.  Otherwise, the law firm might be paying for some of the improvement costs out-of-pocket.

If you are negotiating a lease on behalf of your law firm, do not overlook the TIA allowance.  This is an important part of law firm lease negotiations that many overlook.

If you have any thoughts, feel free to share them below.

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