Commercially leased space might need to be customized to fit a renter's needs. You and the proprietor will have to reach a contract about these modifications and choose:

- who'll create the modifications

• who is accountable for completing or employing out the modification work
• when the job will get done, and
• who must spend for it.
  
  What Is a Tenant 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
  Consult with a Lawyer
  What Is a Renter Improvement Allowance?
  
  The most common way for proprietors and renters to designate the cost of improving business space is for the property owner to offer you what's known as an occupant improvement allowance (TIA). The TIA represents the quantity of cash that the landlord is ready to spend on your enhancements. It's stated either as a per-foot quantity or a total dollar sum. Generally, if the improvements cost more than the agreed-upon amount, you pay the additional.
  
  The lease clause that addresses these problems is usually entitled "Improvements and Alterations."
  
  Negotiating the Payment Method for Your TIA
  
  You generally do not receive the TIA straight. Instead, the proprietor pays the professionals and suppliers as much as the TIA limit-after that, you pay. Or, the proprietor may decide to offer you a month or 2 of "free" lease, which suggests that you must accomplish all that you desire to make with the money you've "saved" by not having to pay the rent.
  
  If you have an option, press for the former arrangement. If the landlord offers you the TIA and you pay the bills, you run the danger that the IRS will consider that income, and tax you accordingly. When the proprietor physically keeps the cash and pays the bills, you can possibly avoid this outcome.
  
  Negotiating the Size of Your TIA
  
  You'll remain in a great position to anticipate a sufficient TIA if you currently understand what your improvements are most likely to cost. You'll require to rely on your area planners or designers for their recommendations. If the proprietor isn't happy to offer you a TIA that'll satisfy the budget, you could still choose that it's worth your while to dish out a few of your own cash to get the look and configuration you desire.
  
  Because you'll be accountable for any expenditures above the TIA, you'll assume the risk (and expenditure) of construction overruns. The danger will increase if the property owner, instead of you and your specialist, does the building and construction. After all, the landlord has little reward to keep expenses within the TIA amount due to the fact that the property owner won't pay for any excess. For this reason, it might be preferable for you to suggest another way to deal with enhancements (as explained later).
  
  Negotiating Protections for Your TIA
  
  One way to manage the eventual cost of your improvements is to firmly insist in the lease provision that the property owner need to look for competitive quotes if the proprietor does the work. Specify that the proprietor must request sealed bids which the bids be opened in your presence. That way, the chances that the proprietor will pick an unnecessarily pricey contractor-or one with whom they have a cozy relationship-are minimized.
  
  Besides managing building and construction overruns, you'll wish to restrict the fees that come out of your TIA. Landlords typically charge overhead and "administrative" fees for renter enhancement work, even if the property owner does not organize the work.
  
  These charges (which could also be charged by the property owner's professional, if they're included) will come out of your TIA, which the property manager is merely using as a revenue source. The more your TIA is depleted by charges, the less you have to invest in the real work.
  
  During lease negotiations, ensure you discover:
  
  - what these charges are going to be and
• whether they're consistent with the leasing practice in your area.
  
  Consult your broker or other knowledgeable business renters.
  
  Negotiating How You Can Use Your TIA
  
  Don't let your property owner tell you that your TIA is a concession or a present. Landlords are usually accountable for the costs of capital enhancements (enhancing the building in a method that will benefit any future renter). If the work under your TIA is a capital enhancement, then the property owner should most likely pay for it anyway.
  
  But even if the work is truly specific-in action to your tastes or uncommon business requirements-and the property owner has actually nevertheless ponied up some money, the property manager isn't even worse off. You can be sure that property managers peg their lease demands high enough to compensate them a minimum of in part for the TIA they're paying you.
  
  Once you comprehend that the TIA is truly yours (you have actually paid for it, one way or the other), you'll wish to have some freedom when it comes to spending it. Consider bargaining for the following two arrangements in the improvements provision:
  
  You can use the TIA for a large range of costs. Especially if the landlord has actually protected the right to keep any unused TIA, make sure that you have broad discretion regarding how you can invest it. For instance, you need to have the ability to use your TIA to designers' and attorneys' costs, permit charges, moving expenses, and even your own time invested securing zoning variances or authorizations. If you do not use the entire TIA, you'll get a setoff against rent. In the not likely event that the last expenses are less than the TIA, the balance must be credited versus your rent. Returning it to the property owner, in essence, denies you of the benefit of all your difficult bargaining over who spends for enhancements.
  
  Alternatives to a TIA: Build-Out and Turnkey
  
  While negotiating a tenant-friendly improvements and modifications provision might appear more suitable, don't be too enamored of a TIA. It isn't "complimentary rent" or a present from the proprietor, and it's not without its downsides. The problem with a TIA is that you, not the landlord, will be accountable for expense overruns. The following 3 alternatives do not run that risk.
  
  Building Standard Allowance, or "Build-Out"
  
  In this plan, the landlord offers you a specified bundle of enhancements and you spend for anything or extra. This option puts the danger of overruns on the proprietor unless you alter the agreed-upon improvements. You're most likely to experience this method in new structures particularly, where the landlord has a construction team and products already on site.
  
  The deal used to you (the "building standard") might include:
  
  - a certain grade of carpeting or vinyl flooring covering
• a particular type of drop-ceiling
• a set number of fluorescent lights per square feet of flooring space, and
• a specified variety of feet of drywall partitions with two coats of paint.
  
  Basically, it's like a fixed-price meal in a restaurant-if you want anything fancier, you pay the difference or arrange for your own specialists to come in and do the job.
  
  If the property manager's offer matches you, the structure requirement might be the simplest and most economical way to go. Its big benefit is that the proprietor, not you, pays for any cost overruns (unless you have actually purchased additional products). And if the work isn't done on time, there can be no question regarding who's responsible (as long as you've not gotten in the method).
  
  If you do not happen to need the whole bundle the property manager is providing, you can likewise work out for a credit for those products you don't utilize. Your proprietor might refuse, nevertheless, if they've currently acquired the products.
  
  You Pay a Fixed Rate, the Landlord Pays the Rest
  
  This arrangement is the reverse of the TIA, where the proprietor pays a fixed sum and you pay the balance.
  
  Your landlord isn't likely to be interested in this technique unless you have plans that are clear, company, and not subject to unexpected boost. That way, the proprietor can realistically evaluate what the improvements will cost them and the likelihood of expense overruns.
  
  For instance, suppose your strategies call for the setup of counter tops made from Italian marble. If the stone remains in stock in your area, great