A Tenant Improvement Allowance Agreement defines funding and construction terms for tenant space modifications. This playbook provides negotiation insights on payment schedules, approval rights, and completion standards.
Why This Matters: Restrictive or vague assignment rights can hinder business restructuring or investment, while overly permissive terms increase credit risk.
Negotiation strategy
If you're the Landlord:
Negotiate for clear consent procedures with specific timelines to ensure flexibility in business operations. Aim to include criteria that prevent unreasonable withholding of consent.
If you're the Tenant:
Ensure that any assignment or subletting does not compromise the financial stability of the premises. Require financial documentation from potential assignees or sublessees.
Essential elements
1
Consent Requirement
Landlord's consent needed.
2
Financial Criteria
Assignee's financial stability.
3
Response Timeline
Landlord's response within 30 days.
Action framework
ACCEPT
Propose edits to include specific criteria and timelines for consent.
EDIT
Reject if the clause allows assignment without landlord consent.
ADD
Add language specifying financial criteria for assignees.
PRO TIP
Always ensure the clause includes a reasonable timeframe for landlord response to maintain operational flexibility.
Example clauses
FAVORABLE
Reasonable Consent Clause
"Tenant may assign or sublet the premises with prior written consent from the landlord, which shall not be unreasonably withheld, conditioned, or delayed. The landlord shall respond within 30 days of receiving a request."
NEUTRAL
Basic Consent Clause
"Tenant may assign or sublet the premises subject to landlord's consent, which shall be provided within a reasonable timeframe."
UNFAVORABLE
Unrestricted Assignment Clause
"Tenant may assign or sublet the premises without landlord's consent."
Fallbacks
High-Risk Tenants
For high-risk tenants, landlords may require more stringent financial criteria and additional security deposits to mitigate potential risks.
Short-Term Leases
In short-term leases, flexibility in assignment and subletting may be increased to accommodate tenant turnover.
Multi-Tenant Buildings
In multi-tenant buildings, landlords may impose stricter controls to maintain a balanced tenant mix and prevent conflicts.
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