Landlord vs. tenant scope: who pays for what

In a commercial buildout, the single document that decides the most about your budget is not the construction contract — it is the lease work letter. It defines what the landlord delivers and what the tenant pays for, and the gaps in it decide who eats the surprises.

The usual split

• Landlord work — often the shell condition: base building, core systems to a point, and sometimes a defined allowance toward the tenant’s improvements.
• Tenant improvement allowance — a dollar figure the landlord contributes, after which the tenant is on the hook. Know whether it is paid up front or as a reimbursement, because that affects your cash flow.
• Tenant work — everything above the allowance and beyond the shell condition. This is your scope, your contractor, and your budget.

Where the gaps hide

The expensive ambiguity is the item both sides assumed the other covered: the rooftop unit, the electrical service size, the restroom rough-in, the storefront. A work letter that says the landlord delivers a "warm shell" without defining exactly what that includes is a negotiation waiting to happen — usually after you have already signed.

Before you sign, get a contractor to read the work letter against the space and flag the gaps while they are still negotiable. We do this with brokers and tenants regularly. Call us and we will help you read the split before it costs you.