ti-work-letter

# Tenant Improvement Work Letter

Draft a binding Work Letter exhibit governing design, approval, construction, and payment of tenant improvements under a commercial lease.

## Prerequisites

Collect before drafting:

1. **Executed or draft lease** — parties, premises, permitted use, rent commencement mechanics
2. **TI allowance terms** — total amount, per-RSF calculation, eligible cost categories
3. **Base building scope** — Landlord deliverables vs. TI Work
4. **Building rules** — contractor requirements, insurance minimums, working-hour restrictions
5. **Target completion date** — and relationship to rent commencement

## Document Sections

### 1. Header & Recitals

- Title as "WORK LETTER" or "TENANT IMPROVEMENT WORK LETTER" — label as Exhibit to Lease
- Reference lease date, parties (full legal names), premises
- State incorporation into Lease; specify which document controls on conflict
- Align effective date with lease execution

### 2. Definitions

Define at minimum:

| Term | Content |
|---|---|
| Tenant Improvements / TI Work | All improvements per Approved Plans; distinguish from base building work |
| TI Allowance | Total $, per-RSF calculation, one-time vs. replenishable |
| Approved Plans | Final space plan + construction drawings + specs approved in writing |
| Substantial Completion | Complete for occupancy per intended use; only punch list items remain; reference building codes |
| Hard Costs | Direct construction — labor, materials |
| Soft Costs | A&E fees, permits, project management |
| Over-Allowance Amount | Costs exceeding TI Allowance |

### 3. Design & Approval Process

Four-phase flow:

1. Preliminary space plan → Landlord review (10–15 business days)
2. Construction documents (arch/MEP) → Landlord review (10–15 business days)
3. Revisions → shortened review per resubmission
4. Written approval of final Approved Plans → construction may commence

Key terms:
- Landlord approval not unreasonably withheld, conditioned, or delayed
- Permitted withholding bases: building-system impact, code violations, value reduction, use conflict
- Change orders require prior written Landlord approval
- Address whether approval delays extend completion deadline or rent commencement

### 4. Permitting & Compliance

- Tenant responsible for all permits, licenses, certificates of occupancy at Tenant's cost
- Permit copies to Landlord before construction; final CO upon completion
- Compliance: building codes, ADA, environmental regulations, all applicable law
- Contractor insurance minimums: CGL, workers' comp, builder's risk — Landlord as additional insured
- Insurance certificates delivered before work commences

### 5. Construction Provisions

**Contractor selection** — specify model: Tenant as GC, Landlord-managed, or Landlord-approved contractor list. Require pre-qualification (experience, financial stability, licensing, insurance).

**Standards:**
- Good and workmanlike manner; new materials ≥ building standard
- Minimize interference with other tenants and building operations
- Restrict hours, noise, common area use, material storage, debris disposal

**Inspection & punch list:**
- Landlord right to inspect in progress; non-conforming work corrected promptly
- Punch list at Substantial Completion; 30–60 day completion window
- Tenant delivers as-built drawings, warranties, O&M manuals

### 6. TI Allowance Structure

| Item | Provision |
|---|---|
| Amount | $__ total ($__ per RSF × __ RSF) |
| Eligible costs | Hard costs, A&E fees, permit fees, project management |
| Excluded costs | FF&E, telecom/data cabling, security systems, Tenant change-order increases |
| Unused allowance | Reverts to Landlord / rent credit / cash payment — specify with conditions and timing |
| Subsequent use | Initial improvements only unless otherwise stated |

### 7. Disbursement Procedures

**Draw request documentation:** paid invoices, conditional and unconditional lien waivers (all tiers), evidence of payment, certification of compliance with Approved Plans.

**Mechanics:**
- Monthly progress draws or lump sum at Substantial Completion — specify
- 10% retainage until final completion + final unconditional waivers + lien-period expiration
- 30-day Landlord processing period after complete documentation
- Payment direct to Tenant or to Tenant's GC
- Tenant indemnifies against mechanics' liens; must bond or remove liens promptly

### 8. Cost Overruns

- Tenant solely responsible for Over-Allowance Amount
- Tenant pays excess directly to contractors (or deposits with Landlord if Landlord-managed)
- Before construction: Tenant demonstrates overrun funding ability (LOC, cash deposit, or acceptable security)
- Specify cost-savings treatment: reversion, credit, or additional improvement use
- Change-order cost increases approved and paid by Tenant

### 9. Timeline & Completion

| Milestone | Deadline |
|---|---|
| Plan submission | __ days after lease execution |
| Plan approval | __ business days after submission |
| Permit issuance | __ days after plan approval |
| Construction start | __ days after permits |
| Substantial Completion | __ days after construction start |

**Delay classification:**

| Type | Examples | Rent Commencement Effect |
|---|---|---|
| Excusable | Force majeure, Landlord-caused, governmental | Day-for-day extension |
| Non-excusable | Tenant-caused, contractor performance | No extension |

Tenant's written notice of claimed Substantial Completion triggers Landlord inspection. Rent commencement not delayed by Tenant's non-excusable failure.

### 10. Default & Remedies

**Tenant defaults:** failure to complete by deadline, failure to pay overruns, non-conforming construction.

**Landlord remedies:** complete work and charge Tenant; require removal of non-conforming work + restoration; cross-default under Lease with termination rights.

**Early termination:** remove partially completed work and restore premises; reimburse disbursed TI Allowance funds. Improvements become Landlord's property; Tenant maintains during Lease term.

### 11. Signature Blocks

Both parties: full legal name, authorized representative signature line, printed name/title, date. Include entity authority representations and notarization blocks if required by jurisdiction.

## Pitfalls & Checks

- Cross-reference Lease defined terms consistently with matching capitalization
- Verify all dollar amounts, RSF figures, and timeframes are internally consistent
- Governing law must match the Lease
- Include amendment procedure (written, signed by both parties)
- Check local lien-filing periods and mechanic's lien statutes for applicable jurisdiction
- Multi-tenant building: address coordination with Landlord's base building contractor
- Do not include FF&E procurement — belongs in a separate exhibit