TIA - Tenant Improvement Allowance Question From Landlord
Owner/Landlord Newbie here: Question for you. Discussing TIA of $10/square foot with prospective tenant. Quotes for work stipulated are coming in 3X higher. Does landlord pay the overage? Or does the tenant? The answer seems obvious to me, but want to be sure. TIA.
[{"id": "izxmuvz", "text": "Unless your deal is to pay for the entire buildout regardless of cost, TIA is just an amount you contribute toward the cost of tenants work. All part of the negotiation.", "replies": [], "depth": 1}, {"id": "izxo7nt", "text": "A TIA is funds a LL contributes to improving a tenant's space up to a set amount, in this case, $10/SF.  It is typically reimbursed after the buildout is complete.  The tenant pays for any overages.\n\n  \nIf a LL was to completely cover the buildout and deliver the space ready for occupancy, that is called \"turnkey.\"", "replies": [{"id": "j00rnez", "text": "and never do a turnkey without very specific terms.", "replies": [{"id": "j03ckg6", "text": "Absolutely.  Because it's such a strong LL market, what we typically do these days is agree to \"turnkey not to exceed $xx.xx/SF\", which is really just a TIA where we are handling all aspects of the construction.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izxuhkq", "text": "If the lease is already signed it'll be tough to get more TIA as there's no LL obligation. But if not, now's the time to ask for it.", "replies": [], "depth": 1}, {"id": "izxy4md", "text": "Assuming the economic terms are still being negotiated, any overage beyond the agreed upon TIA would be tenants responsibility. How the TIA and overage are funded and reimbursed are open to negotiation as well.", "replies": [], "depth": 1}, {"id": "izxzo2i", "text": "If you agreed to giving the tenant $10 per sf and the costs went up, then you as Landlord are only required to give $10 per sf if that\u2019s what you have in the fully executed lease.", "replies": [], "depth": 1}, {"id": "izy9c7n", "text": "Make sure to specify in the lease that reimbursement will occur after all work is done AND contractors/subs have signed lien waivers.", "replies": [{"id": "izzru3b", "text": "And any relevant building department, fire department and utility company signoffs are completed.", "replies": [], "depth": 2}], "depth": 1}, {"id": "izzd465", "text": "Who bid the job? Did you make sure numbers were real? Or tenant and GC bump up to get more from your pocket? \nOn the other side, cost of rough material are through the roof post COVID, so your quotes may be coming higher than expected. \nMake sure the numbers are legit. \nTIA is landlord contribution, you agreed at the time of the lease.", "replies": [], "depth": 1}, {"id": "izzodqz", "text": "Typically after work is completed AND C of O is issued when I do LL rep. Any overage should go to Tenant yet make sure the language backs this with your attorney. You are just helping cover a portion of the build out realistically.", "replies": [], "depth": 1}]