Most commercial leases involve construction, and the work letter governing it is where much of the deal’s economics reside.
Landlord work versus tenant work. Whether the landlord delivers a defined base building and the tenant builds out, or the landlord performs the work to approved plans, changes the risk allocation entirely.
The allowance. Amount per square foot, what it may be spent on — hard costs only, or soft costs, cabling, furniture, moving — and whether unused amounts may be applied to rent.
Disbursement conditions. Lien waivers, contractor affidavits, certificates of occupancy, architect certification, retainage. Tenants should negotiate progress payments rather than a single payment on completion, which requires financing the whole build.
Landlord approval of plans and contractors, with a stated response period and a deemed-approval consequence, and a standard of reasonableness.
Delay. Landlord delay in delivering the premises should extend the rent commencement date and, past an outside date, permit termination. Tenant delay should be defined narrowly.
Commencement date agreement executed once the premises are delivered, fixing the dates. Its absence is a recurring source of disputes about when rent began.
Ownership and removal. Whether improvements belong to the landlord at expiry, and whether the tenant must remove them, which can be a substantial end-of-term liability if not addressed at signing.