Commercial Tenant Improvement Project Checklist

By Gary E. Wilson, President & Designated Broker, Wilson Management, Inc.

Almost every tenant improvement dispute traces back to an ambiguous scope rather than a disputed price. Both parties agreed to "build out the space" while focused on rent and term, and the specifics got settled later — under time pressure, with the tenant's move-in date approaching.

This is a stage-by-stage checklist for avoiding that. It assumes the landlord is contributing an allowance, which is the most common structure.

Before the lease is signed

• Base building condition defined in writing — what exactly is being delivered
• Scope of improvements described with drawings or a specification, not adjectives
• Allowance amount stated, and what it may be spent on — hard costs only, or soft costs, cabling, furniture, tenant-side project management?
• Payment mechanics for the allowance — against progress, on completion, or in advance
• Excess cost — who funds it, and evidence the tenant can
• Unused allowance — retained by the landlord, or applied against rent?
• Who contracts the work — landlord or tenant
• Approval process with landlord response times stated
• Schedule with key dates, including delivery and rent commencement
• Change order pricing and approval mechanics
• Reinstatement — what must be removed at expiry, by reference to the approved drawings

Response times are the item most often omitted. A work letter requiring landlord approval of drawings without stating how long the landlord has to respond hands the tenant a strong argument that landlord delay pushed rent commencement — and that argument is usually a good one.

Design and permitting

• Drawings submitted for landlord approval, and approval given or commented within the stated period
• Base building systems reviewed — does the layout work with existing HVAC zoning, electrical capacity, sprinkler coverage and egress?
• Long-lead items identified at design stage rather than at ordering
• Existing conditions investigated where the building's age warrants it — non-compliant prior work, structural or mechanical surprises, hazardous materials
• Permit timeline understood for the jurisdiction, with correction cycles assumed rather than hoped away
• Accessibility requirements confirmed for the work proposed

HVAC zoning deserves particular attention. A layout putting enclosed offices where the original design assumed open plan can leave rooms with no supply or no return — a comfort complaint no setpoint adjustment will fix, and one that is far cheaper to catch on a drawing than after construction.

Contractor approval and insurance

• Contractor licensed, bonded and adequately insured
• Certificates obtained before work begins, with landlord and manager named as additional insured where required
• Workers' compensation confirmed
• Subcontractor list provided
• Working hours agreed, particularly for noisy or disruptive work
• Access and security arrangements — who has keys or credentials, and when they are revoked

During construction

• Common areas protected on the routes materials travel
• Dust control, since construction dust migrating through a shared return affects the whole floor
• Noise restricted to agreed hours, with affected tenants notified in advance
• Contractor parking directed away from tenant and visitor spaces
• Waste removed rather than accumulated in a corridor
• Base building system interruptions — sprinkler isolation, power shutdowns, alarm testing — notified specifically to affected tenants
• Change orders priced and approved in writing before proceeding, with a running total visible to both parties
• Progress inspected against scope before each payment

Tenant notification is what determines how disruption is received. A neighboring tenant told in advance that demolition runs from 6pm Tuesday plans around it. The same tenant hearing it start at 2pm has a legitimate grievance — and it attaches to the landlord rather than to the contractor causing it.

Allowance payments

• Invoices received and checked against the approved scope
• Lien waivers collected from the contractor and subcontractors as payments are made
• Work inspected before each disbursement
• Final payment withheld until punch list items are genuinely complete

Lien waivers are the item most often skipped and the one that matters if a subcontractor goes unpaid. Paying the allowance as a lump sum in advance transfers the entire risk to the landlord and leaves nothing to withhold if the tenant's contractor walks off.

Closing out

• Punch list issued and completed
• Final inspection and any required sign-offs obtained
• As-built drawings provided and retained
• Warranties and manuals collected for any equipment installed
• Rent commencement confirmed against the lease mechanics
• Reinstatement obligations recorded against the approved drawings while everyone still remembers what was built
• Final lien waivers collected
• Building records updated — systems, keys, access, and any change to base building equipment

Recording reinstatement at close-out rather than at expiry is the single most useful administrative act in the whole process. A decision made now, with drawings in hand, prevents an argument a decade later when the tenant is leaving and has minimal incentive to concede.

Who carries which risk

Understanding where risk sits under each improvement structure explains why the checklist items above matter, and which of them matter most for your particular deal.

Turnkey. The landlord delivers the space finished to an agreed specification for an agreed price. The tenant's exposure is capped and the landlord carries all cost and schedule risk. This is only safe for a landlord where the specification is genuinely complete — "turnkey to tenant's reasonable requirements" is an open check, and the word doing the damage is "reasonable".

Allowance. The landlord contributes a stated sum and the tenant funds the excess. The landlord's exposure is capped at the allowance, but two risks remain: that the tenant cannot fund the overage and the project stalls half-finished, and that the allowance is spent on things the landlord did not intend to fund. Both are addressed by the scope and payment mechanics rather than by the allowance figure.

Landlord work plus tenant work. The landlord delivers a defined base condition and the tenant does the rest. Clean — provided the base condition is genuinely defined. Where it is not, the handover becomes the dispute.

Amortised improvements. The landlord funds the work and recovers it through rent across the term. This is lending, which means the tenant's covenant matters more than usual and the unamortised balance is exposed if the tenancy ends early. Align the amortisation period with the term and consider what security supports it.

The common thread: in every structure, the landlord's protection is the specification and the payment mechanics, not the headline number.

The recurring failure points

Scope in adjectives. "Reasonable", "good quality", "to tenant's requirements" — each will be interpreted generously by whoever is spending the money.

No landlord response deadline. Converts landlord review into an open-ended delay the tenant can build a claim around.

Verbal change orders. Individually small, collectively decisive, and impossible to reconstruct.

Allowance paid ahead of work. Removes every lever the landlord has.

Reinstatement unaddressed. Leaves the argument for the worst possible moment.

Delivery undocumented. Without a walkthrough against the specification and a signed acknowledgement, a later dispute about whether the space was delivered as agreed has no evidence, and the landlord generally carries it.

Long-lead items found at ordering. Equipment with a twelve-week lead time discovered in week eight of a ten-week program drives either a delayed opening or a substitution nobody wanted. Identifying them at design costs nothing.

Permit timelines assumed rather than checked. Jurisdictions differ, correction cycles are normal rather than exceptional, and a schedule built on a first-pass approval is a schedule that slips.

Two things worth doing on every project

Photograph the space before construction begins. Base building condition at handover is the reference point for every later argument about what the tenant found, what they changed, and what has to be reinstated. It takes ten minutes and it is unavailable retrospectively.

Keep the approved drawings with the lease file, not with the project file. Project files get archived when the project closes. The drawings are needed at expiry, potentially a decade later, to establish what was approved and what must be removed — and by then whoever ran the project has usually moved on.

Neither is difficult. Both are the difference between a reinstatement discussion resolved in a phone call and one resolved by concession.

Where to go next## Where to go next

Our Commercial Tenant Improvements page covers how we manage these projects, and Lease Administration covers the option and delivery dates that surround them.

For the full service, see Commercial Property Management, or contact us.