Any landlord or tenant that’s ever been involved in a tenant improvement (TI) project that exceeded the contractor’s estimate, required numerous change orders, and wasn’t finished on the promised date will attest that it’s best to avoid these all-too-common pratfalls. Thankfully, several things can be done during lease negotiations to increase your likelihood of having a positive experience with your TI contractor for a successful commercial remodel/renovation.
Any landlord or tenant that’s ever been involved in a tenant improvement (TI) project that exceeded the contractor’s estimate, required numerous change orders, and wasn’t finished on the promised date will attest that it’s best to avoid these all-too-common pratfalls. Thankfully, several things can be done during lease negotiations to increase your likelihood of having a positive experience with your TI contractor for a successful commercial remodel/renovation.
It’s All In the Details
If the overall cost of improvements is a priority of yours, you must do your best to provide the TI contractor with very accurate and detailed drawings and specs. This way you’ll know that any bid you receive is apples to apples, not apples to oranges.
By presenting detailed plans to your tenant improvement contractor, you’re giving them the confidence that their estimate can get as close to actual costs as possible. While unknown conditions may still appear once construction/demolition begins, contingency funds can be kept to a minimum when the TI contractor is presented with more details early on.
Comparatively, a lack of detail means just the opposite. In this scenario, the contractor must interpret the scope of the work with limited information presented to them. They’ll feel a need to add more contingency costs to ensure they have unknowns covered.
If detailed drawings and specifications are presented, the tenant or landlord can request an equally detailed construction schedule from the contractor. This will give them some peace of mind that the TI contractor can deliver the space on time.
Be Clear on Who Is Coordinating TI Construction
Tenants most often lack either the experience or availability to coordinate TI construction. TI contractors tend to do their best work for repeat customers. This is why many local landlords or commercial property owners most likely have an established relationship with a contractor in the area. Someone they’ve likely worked with before – whether at this property or another one they own.
If the chosen TI contractor is one of the landlord’s choosing, the tenant is advised to request a 12-month warranty from the landlord.
Bring All Parties to the Table
Don’t just sign off on some drawings and keep your fingers crossed for the best. Prior to construction starting, have a meeting where all parties are present. We mean everyone. The tenant, the landlord, the architect or space planner, the TI contractor, their subcontractors, an IT consultant, etc. Preferably, they should all be physically present so everyone meets each other. This way the various contractors are dealing with people they’ve met and somewhat know if a problem ever arises involving the work or input of another.
Each party should present a detailed plan outlining their contribution to the project. Questions should be asked to resolve areas of uncertainty or confusion before they can negatively impact the job at hand. Potential problems or complications can be presented. Suggestions can be made to improve the project, stretch dollars, or resolve potential issues.
Everyone must clearly be aware of the tenant’s move-in date. The goal of this meeting is for all parties to be committed to a delivery date that doesn’t delay the tenant’s move-in date. There has to be synchronicity and coordination among all parties. For instance, the TI contractor’s schedule needs to allow the IT people or funiture installer access to the space.
There also needs to be a point of contact established for whenever a problem arises with the potential to affect delivery or move-in time. Someone with the authority to approve or reject any changes. Usually these responsibilties will fall under the role of project manager.
Payment details also need to be hashed out. Are payments for improvements made upon occupancy? Will there be partial payments made as work milestones are achieved? Who is specified in the lease agreement as being responsible for payments and under what conditions?
If it’s the tenant coordinating the work, the landlord will normally want to tour the property to ensure work has been completed to his or her satisfaction. Once this inspection of completed work has been done, the TI allowance will be paid back to the tenant within a specified number of days.
Generating the space you want, with the customizations you need, won’t be a problem with effective communication, planning, and team building. Tenant improvement projects do not have to be a negative experience. They can actually be quite rewarding.