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Expansion and Improvements in a Commercial Lease
More often than not, a commercial tenant will need to do some work to a space before it's suitable for their business. The "Alterations and Improvements" section of the lease will have all the details regarding what alterations can be done, and who (the tenant or the landlord) will pay for it.
Additionally, the lease should offer some options for the tenant to lease more or less space in the future, depending on the needs of the business.
This section of our site will guide you through some of these important details in your commercial lease, and help you negotiate favorable terms.
Alterations and Improvements
Your lease will detail if and how alterations to the space can be made. It will also include terms on who will pay for the work.
Most often, any space you rent will need to be fixed up or modified before it’s suitable for your use. Your lease is the place to spell out all the details, usually in a clause called "Improvements and Alterations."
You may find that you’ll want to make some changes to your space during your tenancy. The Improvements and Alterations clause should address how you will handle alterations should they come up.
The most common way for landlords and tenants to allocate the expense of improving commercial space is for the landlord to give you what’s known as a tenant improvement allowance, or “TIA” or “TA” for short.
Options to Expand or Contract
Planning for your business' future needs is... well, just good business. Your lease should give you some options to use more or less space down the road.
Unless the commercial real estate market is awash with vacancies, you won’t see an expansion option in your landlord’s lease. That’s because the clause ties up rental space.
An Option to Expand clause should clearly identify the space that you have in mind. It can be in the same building or property, or in another property held by the same landlord.
In addition to including an expansion rights clause (allowing you to take more space in the building if you need it), you’ll want some flexibility if you end up needing less space than you originally leased—for example, if you decide to outsource certain parts of your business.
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