How to Negotiate With Your Landlord About Improvements
May 9, 2016
The portion of your lease that covers improvements is usually called the “Improvements & Alterations” clause. Here are some things to consider when negotiating this clause with your landlord.
How Much Money Do You Need?
TIAs typically fall in the range of $5 to $15 per square foot. If the landlord is offering rent discounts, he or she may offer 1 month free rent for every year on the lease. Ultimately, however, the landlord will consider several factors when deciding how much money to allocate for improvements, including the following:
Does the current market favor tenants or landlords?
Length of your lease term – The longer you’re staying, the more the landlord will be willing to spend for improvements. In general, you should stay for at least 3 years for the landlord to pay for improvements.
Amount of rent you’ll be paying – The higher rent you pay, the higher payout you will likely get for improvements.
Your business’ history and value to the landlord – A business that has a history of drawing a lot of customers will get more money than a brand new business.
Location of the business – Commercial rentals are more competitive in some places than in others. For example, New York landlords are likely to offer fewer concessions than a landlord in Kentucky or Kansas.
As a tenant, you have to work within these constraints, but you can also do a few things to help yourself. The first is to come to the negotiation table with a clear idea of what improvements are needed and how much they will cost. You can consult a designer to survey the space and give estimates for necessary renovations. Without having such plans in advance, you risk agreeing to an amount of money that’s not enough to cover all the work.
If you receive a TIA, there’s a chance you may not use the entire allowance. Some deals allow the tenant to keep the unused portion of the allowance for future improvements. In other deals, the landlord is entitled to recover unused portions of the allowance. Try to negotiate for the former, so you have leeway to make improvements in the future.