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Tenant Improvement Building Permits: What You Need for Eligibility

Commercial leases involve a complex variety of factors. When you are on the hunt for a new space, you search for something functional and attractive. Unfortunately, not every space will include all you need from the start. Landlords try to provide business owners with a dynamic workspace that lives up to your expectations—however, the needs of an office space change over time.

For example, an office built twenty years ago wouldn’t have the capabilities to run new programs and systems used by many companies today. Likewise, a building outfitted for a medical practice wouldn’t include the layout a retail shop would need. That is why many businesses rely on tenant improvements.

Virtually every business will need a tenant improvement at some point during their commercial lease, whether it is a small repair or a total remodel. Let’s discuss what tenant improvements are and whether you are currently eligible for such services.

Tenant Improvement 101

Tenant improvement services, also known as leasehold improvements, include physically altering a rented commercial space for the tenant’s benefit. Some of the enhancements may include outfitting unfinished space, re-arranging an office layout, installing new lighting, refinishing flooring, adding new electrical outlets, necessary repairs, or a complete interior renovation.

Once the lease ends, these improvements revert to the landlord’s ownership, even if you paid for the change. However, tenants may work with their landlord to agree on ownership if you can remove the improvements without damaging the building.

Tenant improvements may be cosmetic or structural, or primarily for safety and access or specific operational reasons. As a tenant improvement construction company, we’ve seen many different types of improvements. Because the arrangement is unique to each space, the limits and specifications are entirely up to you and your landlord.

Example of Tenant Improvements

There are different options available that you can select for your tenant improvement. Some of the most common improvements made to leased commercial spaces include:

  • Layout renovations
  • Updating flooring
  • Constructing or removing interior walls
  • Installing cabinetry
  • Adding electrical
  • Improving plumbing
  • Upgrading security
  • Fire protection add-ons
  • Changing ceiling

How Tenant Improvement Construction Can Bring Major Benefits to Your Business

Depending on your business, customizing your commercial space can be a necessity, not just a perk. For example, if you’re looking to convert commercial space into a dental practice, you need a certain layout to achieve enough exam rooms to support your total number of patients. In the same way, a restaurant needs certain plumbing and electrical requirements to outfit a commercial kitchen.

Tenant improvement construction allows you to convert commercial space into a functional space for your specific business operations. Aside from the necessary renovations that must happen for some businesses, tenant improvements can also offer the following benefits:

Offer a desirable work environment for your employees. For example, a convenient break room area or larger, more spacious offices can go a long way in offering employees comfort during the workday.
Reinforce your brand’s values. Whatever values are important to your company should be reflected in your physical space. That could include top-notch security for employees working late or spacious meeting rooms to encourage collaboration. It could also include renting commercial space in a convenient location to employees or customers — even though it requires additional tenant improvement construction to make it work for your business.
Enhance your brand perception among others. A modern, well-designed office that complements your operations can greatly improve how your brand is perceived by customers, vendors, or employees.

Determining Your Tenant Improvement Eligibility

The cost of constructing leaseholds are typically paid fully by the landlord or partially. However, some tenants are responsible for covering the cost of tenant improvements. It largely depends on the terms of your lease, which may include a tenant improvement allowance (TIA), building standard allowance, or turnkey lease.

Tenant Improvement Allowance

Tenant improvement allowances are the amount of money your landlord agrees to pay for leasehold improvements according to your lease. You can typically find the number of your TIA your lease as a fixed sum or per-foot amount.

When using your TIA for improvements, you must decide to work within these means or pay for any extra cost. If your landlord gives you the money for the improvements directly, keep in mind that the IRS may consider the TIA taxable income.

An important practice to implement when using your TIA to cover construction costs is supervising the improvements personally. You can also try negotiating additional control with your landlord to keep your costs within your means.

Building Standard Allowance

Another form of tenant improvement cost coverage that your landlord may offer in your leasehold agreement is a building standard allowance (BSA). This allowance is a package of specified tenant improvements the landlord will completely cover as part of your lease. The benefit of these allowance agreements is that the landlord is responsible for any cost, even if it costs more than estimated.

Unfortunately, if your company needs a different leasehold improvement than those pre-determined in your BSA, you will be responsible for covering the costs. On the other hand, you may ask for a rental rebate if you spend less than the full BSA amount.

Turnkey Lease Agreements

Another option offered by landlords is a turnkey tenant improvement. In these situations, the landlord will cover all of the costs before moving into the commercial space. Turnkey jobs give the landlord total control over the improvements, which can sometimes lead to poorer work and less customization.

If you agree to turnkey improvements, consider adding a clause into your lease that gives you final approval to have a say in the quality and materials. No matter which type of tenant improvement agreement you approve, it is important that you find the best contractor for the job.

Find Your Tenant Improvement Contractor

Leasehold improvement contractors provide you with all the tools you need to make construction easy. Cook Builders is a commercial contractor in Utah that offers tenant improvement services of every kind.

Our tenant improvement services are designed to fit a range of needs and prices. Working with our commercial contractors, we’ll help you determine the improvements that would work best for your business. After discussing needs, we’ll find the most effective way to get the job done.

We also work with your schedule so that the renovation won’t disrupt your daily business. We even work fast, so you have an improved space in as little as 3-6 weeks. This upfront method is unique to the commercial contracting industry, but it helps you move forward with a clear idea of what you’re getting.

If you need a trusted tenant improvement contractor for your commercial space, contact Cook Builders today. We look forward to helping you customize a project that fully outfits your building with everything you need to succeed.