Commercially leased space may have to be customized to fit a tenant's requirements. You and the landlord will need to reach an arrangement about these modifications and decide:

- who'll come up with the personalizations

• who is accountable for completing or working with out the customization work
• when the job will get done, and
• who need to spend for it.
  
  What Is an Occupant Improvement Allowance?
  Negotiating the Payment Method for Your TIA
  Negotiating the Size of Your TIA
  Negotiating Protections for Your TIA
  Negotiating How You Can Use Your TIA
  Alternatives to a TIA: Build-Out and Turnkey
  Talk to an Attorney
  What Is an Occupant Improvement Allowance?
  
  The most common way for property owners and renters to allocate the expenditure of enhancing industrial space is for the proprietor to give you what's called an occupant enhancement allowance (TIA). The TIA represents the amount of money that the landlord is willing to spend on your improvements. It's stated either as a per-foot amount or an overall dollar amount. Generally, if the improvements cost more than the agreed-upon amount, you pay the additional.
  
  The lease clause that addresses these issues is generally titled "Improvements and Alterations."
  
  Negotiating the Payment Method for Your TIA
  
  You typically do not get the TIA directly. Instead, the property manager pays the professionals and suppliers approximately the TIA limit-after that, you pay. Or, the property owner might decide to provide you a month or 2 of "free" rent, which indicates that you need to accomplish all that you want to make with the money you've "saved" by not having to pay the lease.
  
  If you have an option, press for the previous arrangement. If the proprietor provides you the TIA and you pay the costs, you risk that the IRS will consider that income, and tax you appropriately. When the property manager physically keeps the cash and pays the expenses, you can potentially prevent this result.
  
  Negotiating the Size of Your TIA
  
  You'll be in an excellent position to deal for a sufficient TIA if you currently understand what your enhancements are most likely to cost. You'll need to rely on your area organizers or designers for their suggestions. If the proprietor isn't going to offer you a TIA that'll fulfill the spending plan, you could still choose that it's worth your while to shell out a few of your own cash to get the appearance and configuration you desire.
  
  Because you'll be accountable for any expenses above the TIA, you'll presume the danger (and expense) of building and construction overruns. The danger will increase if the landlord, rather than you and your contractor, does the construction. After all, the property owner has little incentive to keep costs within the TIA amount due to the fact that the property owner won't pay for any excess. For this factor, it may be preferable for you to recommend another method to handle enhancements (as discussed later on).
  
  Negotiating Protections for Your TIA
  
  One way to manage the ultimate cost of your enhancements is to firmly insist in the lease stipulation that the proprietor need to look for competitive bids if the proprietor does the work. Specify that the landlord must ask for sealed bids which the quotes be opened in your existence. That method, the opportunities that the landlord will select a needlessly costly contractor-or one with whom they have a relaxing relationship-are lessened.
  
  Besides managing construction overruns, you'll want to limit the costs that come out of your TIA. Landlords normally charge overhead and "administrative" charges for tenant improvement work, even if the property owner doesn't take charge of the work.
  
  These fees (which could also be charged by the landlord's professional, if they're included) will come out of your TIA, which the property owner is simply using as an earnings source. The more your TIA is depleted by charges, the less you need to spend on the real work.
  
  During lease settlements, make certain you learn:
  
  - what these costs are going to be and
• whether they're constant with the leasing practice in your location.
  
  Talk to your broker or other well-informed business tenants.
  
  Negotiating How You Can Use Your TIA
  
  Don't let your proprietor inform you that your TIA is a concession or a present. Landlords are typically accountable for the costs of capital enhancements ( the building in a manner that will benefit any future tenant). If the work under your TIA is a capital enhancement, then the landlord ought to probably spend for it anyway.
  
  But even if the work is truly specific-in action to your tastes or uncommon organization requirements-and the landlord has actually however ponied up some cash, the property owner isn't even worse off. You can be sure that landlords peg their lease demands high enough to compensate them a minimum of in part for the TIA they're paying you.
  
  Once you understand that the TIA is truly yours (you've paid for it, one method or the other), you'll want to have some freedom when it comes to investing it. Consider bargaining for the following two arrangements in the improvements stipulation:
  
  You can utilize the TIA for a large range of expenditures. Especially if the landlord has actually secured the right to keep any unused TIA, be sure that you have broad discretion regarding how you can invest it. For example, you should be able to apply your TIA to designers' and lawyers' charges, permit charges, moving costs, and even your own time invested protecting zoning variations or permits. If you do not utilize the entire TIA, you'll get a setoff against rent. In the not likely occasion that the last costs are less than the TIA, the balance should be credited against your lease. Returning it to the proprietor, in essence, denies you of the benefit of all your hard bargaining over who spends for enhancements.
  
  Alternatives to a TIA: Build-Out and Turnkey
  
  While working out a tenant-friendly enhancements and alterations stipulation might seem preferable, don't be too enamored of a TIA. It isn't "complimentary rent" or a present from the property manager, and it's not without its drawbacks. The problem with a TIA is that you, not the proprietor, will be accountable for cost overruns. The following 3 alternatives do not run that danger.
  
  Building Standard Allowance, or "Build-Out"
  
  In this arrangement, the proprietor uses you a defined package of enhancements and you pay for anything fancier or extra. This alternative puts the risk of overruns on the landlord unless you change the agreed-upon improvements. You're likely to experience this technique in new structures especially, where the landlord has a building team and products currently on website.
  
  The offer used to you (the "building standard") might include:
  
  - a certain grade of carpets or vinyl floor covering
• a specific type of drop-ceiling
• a set variety of fluorescent lights per square feet of floor area, and
• a defined number of feet of drywall partitions with 2 coats of paint.
  
  Basically, it's like a fixed-price meal in a restaurant-if you want anything fancier, you pay the distinction or schedule your own professionals to come in and do the job.
  
  If the property owner's offer suits you, the structure requirement could be the most basic and most cost-effective way to go. Its big benefit is that the property manager, not you, pays for any cost overruns (unless you have actually purchased extra products). And if the work isn't done on time, there can be no question as to who's accountable (as long as you've not obstructed).
  
  If you do not happen to require the entire plan the landlord is offering, you can also work out for a credit for those items you do not use. Your property manager might refuse, however, if they've already purchased the products.
  
  You Pay a Fixed Rate, the Landlord Pays the Rest
  
  This plan is the reverse of the TIA, where the landlord pays a set sum and you pay the balance.
  
  Your proprietor isn't most likely to be interested in this method unless you have strategies that are clear, firm, and not subject to unanticipated cost increases. That method, the property owner can realistically evaluate what the improvements will cost them and the likelihood of expense overruns.
  
  For example, expect your strategies require the installation of counter tops made of Italian marble. If the stone remains in stock in your area, fantastic