The process of looking for a decent office rental for your business is usually challenging enough. But you might run across a situation where you find one in the perfection location, yet the space needs some maintenance. Or, it might need to be reconfigured to certain dimensions in order to suit your business requirements. How do you go about talking to your landlord about doing such a thing?
In these instances, your landlord may give you a tenant improvement allowance that gives you a specific amount to take care of those improvements. Your landlord would invest in this based on the length of your lease and how much rent he’ll expect to get out of you in the future. Beyond that, there’s always one issue involved: How much money he’ll give you to make those repairs.
Negotiating the Amount
According to Nolo, you should hire designers to come in and give an estimate of the office construction. That amount can help your landlord decide how much he’ll give you based on his own personal decisions. If he gives you less than you want, it’s going to require some negotiation on your part so you won’t come out on the losing end.
In the scenario you put some of your own money forth to help with the work, your landlord may waive your rent for a month or two in return. Following that, the person hiring the contractor to do the work could be a problem in determining who takes the most risk.
Don’t Let the Landlord Hire the Contractor
When you make a deal with your landlord to take on part of the costs, you’re going to be responsible for any cost overruns. And if you’re too busy to hire the contractor to do the building, you’ll be taking more risk financially if you allow your landlord to take over. The only way to prevent any costly overruns is to work around the tenant improvement allowance and go with a standard design your landlord already has in mind.
In the above scenario, the landlord has an on-site construction crew apply a basic design for a flat rate. You’d agree to pay for anything extra that you want built in your office space.
Watching Out for Administrative Fees
During the times when that tenant improvement allowance looks substantial, your landlord may deplete a portion of it with overhead administrative fees. As with most fees, you might be perplexed at what exactly they’re for other than just attempting to scalp you. Your landlord may be going against typical leasing practices in your city if he refuses to give you specifics on what those fees are. In most cases, any negotiations beforehand should be able to scope out the reasoning behind fees that don’t initially make sense.
Negotiating When Some of the Allowance is Left Over
You might experience a rare time when your tenant improvement allowance comes in under budget. It’s certainly possible if you chose a contractor with more reasonable construction rates. Regardless, you have to be aware of this issue beforehand and draw up an agreement with your landlord on how you use the extra money. The best scenario is using the money as a credit toward future rent. You should also work out an agreement where you can additionally use those savings for other expenses in your business.
It’s a situation where finding quality construction work on the cheap will be your only way to come out ahead in the constant financial game you’ll be playing with your landlord.
