Moving your business into a new space can be an exciting prospect. Whether you’re starting a new company or upgrading to a larger or better-located commercial property, you’re likely thinking of all the ways you might modify the space to meet your evolving needs.
If you’re renting the space, however, you will need to be very careful about the types of changes you make, as your landlord may have some ideas about what will or will not be allowed. In fact, it’s a good idea, once you’ve found that dream property, to negotiate the terms of your lease before you sign it in a way that provides you with some flexibility.
What types of changes would you like to make?
When leasing commercial property to tenants, landlords may want varying degrees of involvement in the property in general, and in tenant improvements in particular. A very hands-off landlord may want a tenant to get major renovations approved in advance, but be largely indifferent to smaller or cosmetic changes. Other landlords, however, want to have a say in any and all alterations.
Landlords will ideally communicate their preferences before the lease has been signed, but regardless, you’ll want to carefully note any language in the lease pertaining to improvements and renovations.
The key distinction when referring to tenant improvements and renovations isn’t so much the relative “difficulty” of the job, but rather the degree of impact the proposed changes will have—both on other tenants and on the landlord’s ability to rent or even sell the property in the future. For example, repainting the space or installing a certain type of window treatment will likely qualify as minor alterations, not because the jobs are easy, but because those changes (and the process of making them) won’t impact other tenants in the building and can be easily modified in the future if the tenant moves out.
On the other hand, other types of improvements may create problems for other tenants or have such an impact on the overall structure of the building that they will make the landlord balk at approving them. Knocking out a load-bearing wall, eliminating or adding windows, installing new staircases and removing or altering a characteristic or iconic feature of the building are just some of the changes that might fall under the category of “major.” A landlord will almost certainly require approval for such changes, and may even be reluctant to grant it when asked.
Making sure you understand each other
Due to the potential for miscommunication or misunderstandings when it comes to tenant improvements, it’s extremely important that you and your landlord discuss and arrive at an agreement regarding what types of changes will be permitted with or without approval being required—and which types will be forbidden outright. Failure to understand the clause in your commercial lease pertaining to tenant improvements and renovations may result in potentially costly legal problems with your landlord.
Renting a commercial space requires a clear understanding of your rights as a tenant when it comes to a variety of issues, including tenant improvements. If you have questions or concerns about the terms of your lease, consult a knowledgeable business and real estate attorney.
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