Tenant Improvement Work Letter
Draft a binding Work Letter exhibit governing design, approval, construction, and payment of tenant improvements under a commercial lease.
Prerequisites
Collect before drafting:
- Executed or draft lease — parties, premises, permitted use, rent commencement mechanics
- TI allowance terms — total amount, per-RSF calculation, eligible cost categories
- Base building scope — Landlord deliverables vs. TI Work
- Building rules — contractor requirements, insurance minimums, working-hour restrictions
- Target completion date — and relationship to rent commencement
Document Sections
1. Header & Recitals
- Title as "WORK LETTER" or "TENANT IMPROVEMENT WORK LETTER" — label as Exhibit to Lease
- Reference lease date, parties (full legal names), premises
- State incorporation into Lease; specify which document controls on conflict
- Align effective date with lease execution
2. Definitions
Define at minimum:
| Term |
Content |
| Tenant Improvements / TI Work |
All improvements per Approved Plans; distinguish from base building work |
| TI Allowance |
Total $, per-RSF calculation, one-time vs. replenishable |
| Approved Plans |
Final space plan + construction drawings + specs approved in writing |
| Substantial Completion |
Complete for occupancy per intended use; only punch list items remain; reference building codes |
| Hard Costs |
Direct construction — labor, materials |
| Soft Costs |
A&E fees, permits, project management |
| Over-Allowance Amount |
Costs exceeding TI Allowance |
3. Design & Approval Process
Four-phase flow:
- Preliminary space plan → Landlord review (10–15 business days)
- Construction documents (arch/MEP) → Landlord review (10–15 business days)
- Revisions → shortened review per resubmission
- Written approval of final Approved Plans → construction may commence
Key terms:
- Landlord approval not unreasonably withheld, conditioned, or delayed
- Permitted withholding bases: building-system impact, code violations, value reduction, use conflict
- Change orders require prior written Landlord approval
- Address whether approval delays extend completion deadline or rent commencement
4. Permitting & Compliance
- Tenant responsible for all permits, licenses, certificates of occupancy at Tenant's cost
- Permit copies to Landlord before construction; final CO upon completion
- Compliance: building codes, ADA, environmental regulations, all applicable law
- Contractor insurance minimums: CGL, workers' comp, builder's risk — Landlord as additional insured
- Insurance certificates delivered before work commences
5. Construction Provisions
Contractor selection — specify model: Tenant as GC, Landlord-managed, or Landlord-approved contractor list. Require pre-qualification (experience, financial stability, licensing, insurance).
Standards:
- Good and workmanlike manner; new materials ≥ building standard
- Minimize interference with other tenants and building operations
- Restrict hours, noise, common area use, material storage, debris disposal
Inspection & punch list:
- Landlord right to inspect in progress; non-conforming work corrected promptly
- Punch list at Substantial Completion; 30–60 day completion window
- Tenant delivers as-built drawings, warranties, O&M manuals
6. TI Allowance Structure
| Item |
Provision |
| Amount |
$__ total ($__ per RSF × __ RSF) |
| Eligible costs |
Hard costs, A&E fees, permit fees, project management |
| Excluded costs |
FF&E, telecom/data cabling, security systems, Tenant change-order increases |
| Unused allowance |
Reverts to Landlord / rent credit / cash payment — specify with conditions and timing |
| Subsequent use |
Initial improvements only unless otherwise stated |
7. Disbursement Procedures
Draw request documentation: paid invoices, conditional and unconditional lien waivers (all tiers), evidence of payment, certification of compliance with Approved Plans.
Mechanics:
- Monthly progress draws or lump sum at Substantial Completion — specify
- 10% retainage until final completion + final unconditional waivers + lien-period expiration
- 30-day Landlord processing period after complete documentation
- Payment direct to Tenant or to Tenant's GC
- Tenant indemnifies against mechanics' liens; must bond or remove liens promptly
8. Cost Overruns
- Tenant solely responsible for Over-Allowance Amount
- Tenant pays excess directly to contractors (or deposits with Landlord if Landlord-managed)
- Before construction: Tenant demonstrates overrun funding ability (LOC, cash deposit, or acceptable security)
- Specify cost-savings treatment: reversion, credit, or additional improvement use
- Change-order cost increases approved and paid by Tenant
9. Timeline & Completion
| Milestone |
Deadline |
| Plan submission |
__ days after lease execution |
| Plan approval |
__ business days after submission |
| Permit issuance |
__ days after plan approval |
| Construction start |
__ days after permits |
| Substantial Completion |
__ days after construction start |
Delay classification:
| Type |
Examples |
Rent Commencement Effect |
| Excusable |
Force majeure, Landlord-caused, governmental |
Day-for-day extension |
| Non-excusable |
Tenant-caused, contractor performance |
No extension |
Tenant's written notice of claimed Substantial Completion triggers Landlord inspection. Rent commencement not delayed by Tenant's non-excusable failure.
10. Default & Remedies
Tenant defaults: failure to complete by deadline, failure to pay overruns, non-conforming construction.
Landlord remedies: complete work and charge Tenant; require removal of non-conforming work + restoration; cross-default under Lease with termination rights.
Early termination: remove partially completed work and restore premises; reimburse disbursed TI Allowance funds. Improvements become Landlord's property; Tenant maintains during Lease term.
11. Signature Blocks
Both parties: full legal name, authorized representative signature line, printed name/title, date. Include entity authority representations and notarization blocks if required by jurisdiction.
Pitfalls & Checks
- Cross-reference Lease defined terms consistently with matching capitalization
- Verify all dollar amounts, RSF figures, and timeframes are internally consistent
- Governing law must match the Lease
- Include amendment procedure (written, signed by both parties)
- Check local lien-filing periods and mechanic's lien statutes for applicable jurisdiction
- Multi-tenant building: address coordination with Landlord's base building contractor
- Do not include FF&E procurement — belongs in a separate exhibit
1---2name: ti-work-letter3description: Drafts a Tenant Improvement Work Letter exhibit for commercial leases. Trigger when the user needs a work letter, TI letter, tenant build-out exhibit, or improvement allowance agreement for a commercial leasing transaction.4tags:5 - agreement6 - drafting7 - transactional8---910# Tenant Improvement Work Letter1112Draft a binding Work Letter exhibit governing design, approval, construction, and payment of tenant improvements under a commercial lease.1314## Prerequisites1516Collect before drafting:17181. **Executed or draft lease** — parties, premises, permitted use, rent commencement mechanics192. **TI allowance terms** — total amount, per-RSF calculation, eligible cost categories203. **Base building scope** — Landlord deliverables vs. TI Work214. **Building rules** — contractor requirements, insurance minimums, working-hour restrictions225. **Target completion date** — and relationship to rent commencement2324## Document Sections2526### 1. Header & Recitals2728- Title as "WORK LETTER" or "TENANT IMPROVEMENT WORK LETTER" — label as Exhibit to Lease29- Reference lease date, parties (full legal names), premises30- State incorporation into Lease; specify which document controls on conflict31- Align effective date with lease execution3233### 2. Definitions3435Define at minimum:3637| Term | Content |38|---|---|39| Tenant Improvements / TI Work | All improvements per Approved Plans; distinguish from base building work |40| TI Allowance | Total $, per-RSF calculation, one-time vs. replenishable |41| Approved Plans | Final space plan + construction drawings + specs approved in writing |42| Substantial Completion | Complete for occupancy per intended use; only punch list items remain; reference building codes |43| Hard Costs | Direct construction — labor, materials |44| Soft Costs | A&E fees, permits, project management |45| Over-Allowance Amount | Costs exceeding TI Allowance |4647### 3. Design & Approval Process4849Four-phase flow:50511. Preliminary space plan → Landlord review (10–15 business days)522. Construction documents (arch/MEP) → Landlord review (10–15 business days)533. Revisions → shortened review per resubmission544. Written approval of final Approved Plans → construction may commence5556Key terms:57- Landlord approval not unreasonably withheld, conditioned, or delayed58- Permitted withholding bases: building-system impact, code violations, value reduction, use conflict59- Change orders require prior written Landlord approval60- Address whether approval delays extend completion deadline or rent commencement6162### 4. Permitting & Compliance6364- Tenant responsible for all permits, licenses, certificates of occupancy at Tenant's cost65- Permit copies to Landlord before construction; final CO upon completion66- Compliance: building codes, ADA, environmental regulations, all applicable law67- Contractor insurance minimums: CGL, workers' comp, builder's risk — Landlord as additional insured68- Insurance certificates delivered before work commences6970### 5. Construction Provisions7172**Contractor selection** — specify model: Tenant as GC, Landlord-managed, or Landlord-approved contractor list. Require pre-qualification (experience, financial stability, licensing, insurance).7374**Standards:**75- Good and workmanlike manner; new materials ≥ building standard76- Minimize interference with other tenants and building operations77- Restrict hours, noise, common area use, material storage, debris disposal7879**Inspection & punch list:**80- Landlord right to inspect in progress; non-conforming work corrected promptly81- Punch list at Substantial Completion; 30–60 day completion window82- Tenant delivers as-built drawings, warranties, O&M manuals8384### 6. TI Allowance Structure8586| Item | Provision |87|---|---|88| Amount | $__ total ($__ per RSF × __ RSF) |89| Eligible costs | Hard costs, A&E fees, permit fees, project management |90| Excluded costs | FF&E, telecom/data cabling, security systems, Tenant change-order increases |91| Unused allowance | Reverts to Landlord / rent credit / cash payment — specify with conditions and timing |92| Subsequent use | Initial improvements only unless otherwise stated |9394### 7. Disbursement Procedures9596**Draw request documentation:** paid invoices, conditional and unconditional lien waivers (all tiers), evidence of payment, certification of compliance with Approved Plans.9798**Mechanics:**99- Monthly progress draws or lump sum at Substantial Completion — specify100- 10% retainage until final completion + final unconditional waivers + lien-period expiration101- 30-day Landlord processing period after complete documentation102- Payment direct to Tenant or to Tenant's GC103- Tenant indemnifies against mechanics' liens; must bond or remove liens promptly104105### 8. Cost Overruns106107- Tenant solely responsible for Over-Allowance Amount108- Tenant pays excess directly to contractors (or deposits with Landlord if Landlord-managed)109- Before construction: Tenant demonstrates overrun funding ability (LOC, cash deposit, or acceptable security)110- Specify cost-savings treatment: reversion, credit, or additional improvement use111- Change-order cost increases approved and paid by Tenant112113### 9. Timeline & Completion114115| Milestone | Deadline |116|---|---|117| Plan submission | __ days after lease execution |118| Plan approval | __ business days after submission |119| Permit issuance | __ days after plan approval |120| Construction start | __ days after permits |121| Substantial Completion | __ days after construction start |122123**Delay classification:**124125| Type | Examples | Rent Commencement Effect |126|---|---|---|127| Excusable | Force majeure, Landlord-caused, governmental | Day-for-day extension |128| Non-excusable | Tenant-caused, contractor performance | No extension |129130Tenant's written notice of claimed Substantial Completion triggers Landlord inspection. Rent commencement not delayed by Tenant's non-excusable failure.131132### 10. Default & Remedies133134**Tenant defaults:** failure to complete by deadline, failure to pay overruns, non-conforming construction.135136**Landlord remedies:** complete work and charge Tenant; require removal of non-conforming work + restoration; cross-default under Lease with termination rights.137138**Early termination:** remove partially completed work and restore premises; reimburse disbursed TI Allowance funds. Improvements become Landlord's property; Tenant maintains during Lease term.139140### 11. Signature Blocks141142Both parties: full legal name, authorized representative signature line, printed name/title, date. Include entity authority representations and notarization blocks if required by jurisdiction.143144## Pitfalls & Checks145146- Cross-reference Lease defined terms consistently with matching capitalization147- Verify all dollar amounts, RSF figures, and timeframes are internally consistent148- Governing law must match the Lease149- Include amendment procedure (written, signed by both parties)150- Check local lien-filing periods and mechanic's lien statutes for applicable jurisdiction151- Multi-tenant building: address coordination with Landlord's base building contractor152- Do not include FF&E procurement — belongs in a separate exhibit
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