Definition of Tenants Improvements

Written by daniel thompson
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Definition of Tenants Improvements
Tenants and landowners can work together to improve properties. (apartment building image by jimcox40 from Fotolia.com)

Sometimes work needs to be done to a property to make it more suitable for use by the party that will be using it. This work falls under the designation tenant improvement. This type of work is typically governed by an agreement between property owners and whomever is going to use the property in question.

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Definition

Business Dictionary defines a tenant improvement as changes to a property made by the owner to accommodate the needs of a tenant. These changes encompass a wide variety of work ranging from the installation of fire protection and security to the installation and arrangement of walls and flooring. This can be agreement between two businesses over a commercial or industrial property or an agreement between a landlord and a private resident.

General Legal Agreements

Tenant improvements are frequently governed by agreements between the owner and user of the property. These agreements range from verbal to written contracts that govern the scope and nature of the improvements and how they will be paid for. Who will preform the work to be done is another common focus for legal agreements governing tenant improvements.

Tenant Work Letter

For businesses, a formal agreement is required before tenant improvements are made. This agreement is known as a tenant work letter. It covers the aspects mentioned in more general agreements but is intended as a formal contract between two parties. This type of agreement takes several forms depending on the circumstances surrounding the agreement.

Tenant Build Work Letter

In this type of agreement the owner of a property provides a basic site that the intended tenant then contracts to have completed. In this type of tenant improvement agreement the costs of the improvements are primarily born by the tenant.

Turn-Key Work Letter

This type of agreement is the opposite of the tenant build work letter in that the costs of the tenant improvements are carried by the owner of the property. The prospective tenant negotiates for the owner to provide a property in a state that is completely ready for the tenant to use with minimum effort.

Landlord Build With Allowance

In this type of tenant work letter the owner of the property contracts to have the property improved, but only pays a predetermined amount. The contract covers when the property will be delivered and specifies its characteristics and condition. However, the owner controls the quality of the project, and any costs over the agreed upon amount are born by the tenant.

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