Spell Out Work Letter Terms Carefully

Many tenants need to customize the space they lease, whether it’s in an office building or shopping center. But altering space—even for simple improvements—can be complicated. So when signing leases, you’ll want to have a work letter agreement—a contract that establishes the terms and conditions of structural changes that will be made to the tenant’s space prior to moving in.

Your work letter agreement won’t go into painstaking detail for every aspect of the tenant’s renovations. However, you must make sure that it includes definitions of key terms and assigns categories of responsibility to you and the tenant. For example, it’s important to clearly define what qualifies as a “base building improvement” or a “base, shell, and core.”

You should also clarify what the tenant may purchase with its tenant improvement allowance (TIA) if the work letter agreement says that you will pay for a specific dollar amount worth of tenant improvements.

For two more key items you’ll need to address in your work letter, and model language with a definition you can adapt, see “Draft Favorable Work Letter Terms Before Construction Begins,” available to subscribers here.