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Charles Feitel

Why You Should Get A Complimentary Lease Review (Part III)

Why You Should Get A Complimentary Lease Review (Part III)

9/5/2019 6:04:32 AM   |   Comments: 0   |   Views: 9

Expansion Clauses

If your future includes plans for expansion, your tenant rep will look to make sure you have a sufficiently robust expansion clause in your lease. Here are two popular ones:

RIGHT OF FIRST OFFER (ROFO)

If you have Right of First Offer (FOFO) in your contract, you'll get the right to lease a property before the landlord offers it to someone else.

You'll need to negotiate two conditions along with this right. They are, the window of time you'll be given to exercise it before it reverts back to your landlord and whether you have to put down a deposit.

RIGHT OF FIRST REFUSAL (ROFR)

If you have a Right of First Refusal (ROFR), you'll get the opportunity to match an offer made by another prospective lessee.

Tenant Improvements Allowance (TIA)

If you haven't signed your lease yet, your broker will want to carefully look at the section entitled the "Improvements & Alterations Clause." This is the part of your contract that covers improvements.

Sometimes your landlord will push you into doing a turn-key build-out. This means your landlord will take care of the construction for you. All you have to do is show up on opening day.

But this convenience comes with a price because you won't be in control of the process. If you want to be in control, go with a tenant improvement build-out instead.

When you do, your landlord will give you a Tenant Improvement Allowance (TIA). This is money to do renovations to your space. These renovations can include demolishing existing walls, installing hardwood floors, making your office ADA compliant, and many other things.

With a tenant improvement allowance, you'll get to oversee every aspect of the renovations yourself. Then, you'll be able to make sure that the work is impeccably done, with high-quality materials.

However, some landlords are control freaks who want to retain oversight of the process. And no matter how much negotiating expertise your tenant rep has, you probably won't be able to wrest control from him.

If this is the situation with you, make sure you explicitly put into writing what you want to have done and how you want it done. 

If you didn't negotiate with a clear idea of how much your tenant improvements would cost, you probably didn't get the TIA you deserve. But it's not too late for your tenant rep to step in and save you.

Just remember in the future, NEVER negotiate without having one present. And if you have a lease renewal coming up, get a tenant rep ASAP. Don't even think about negotiating on your own!

Leftover and Restricted TIA Money

Because of your expert project expertise, renovations might cost less than what was budgeted. Some landlords want this leftover TIA money returned to them.

This isn't fair!

Why should you be penalized just because you were a good project manager? A tenant broker can negotiate so that you get to keep any leftover funds.

Then, you'll be able to use this money for future renovations.

Sometimes, landlords want to restrict how you can use TIA money. So, you might be limited to only using it for materials, labor, and construction costs.

A good tenant rep can see to it that other costs are covered. So, you might be able to use this money for legal, design, and additional fees.

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