Landlord Work vs Tenant Improvements: Who Pays and Who Delivers
The Short Answer
Commercial lease deals should separate landlord work from tenant improvements before signing. The parties should document what the landlord delivers, what the tenant builds, who pays, who applies for permits, when rent starts, what happens if work is delayed, and whether improvements must be removed at the end of the lease.
Buildout language can decide whether a space opens on time and whether the budget still works.
Who This Helps
This guide is for Greater Vancouver tenants, landlords, clinic operators, restaurants, daycare users, service businesses, and business buyers reviewing commercial buildout obligations.
Advisor Note
Do not evaluate a lease only by rent. A cheap unit with expensive tenant work can be more costly than a higher-rent unit delivered closer to opening condition.
Define the Starting Condition
The lease should state the condition of the premises at possession. Is the space shell, warm shell, improved office, former restaurant, former clinic, or as-is? Are washrooms, HVAC, electrical, plumbing, sprinklers, flooring, ceiling, accessibility, and fire separation already suitable?
Photos, plans, schedules, and inspection notes can reduce disputes. If something matters to opening, it should be in the lease package, not only discussed verbally.
Landlord Work
Landlord work may include demising walls, base building HVAC, electrical service, plumbing rough-ins, washrooms, roof repairs, storefront repairs, accessibility items, sprinkler work, or code upgrades. The lease should state scope, standard, deadline, permit responsibility, and remedies if incomplete.
If the tenant’s obligation to pay rent starts before landlord work is finished, the tenant may carry cost without being able to operate.
Tenant Improvements
Tenant improvements may include layout, walls, flooring, millwork, signs, equipment, plumbing, dental or medical infrastructure, grease systems, security, lighting, IT, and furniture. The tenant should understand approval steps, contractor requirements, insurance, deposits, lien clearance, and work-hour rules.
JQ-Properties’ guide on medical or dental clinic space explains why specialized uses need premises review before committing.
Allowances and Payments
Some landlords provide a tenant improvement allowance. The lease should explain the amount, payment timing, holdback, required invoices, lien clearance, landlord inspection, and whether unused money is lost or credited.
If the allowance is paid after completion, the tenant needs enough cash to fund work first. If the landlord pays contractors directly, the parties should know who controls scope and change orders.
Permits and Approvals
Buildout may require municipal permits, strata consent, landlord approval, engineers, fire review, health review, or professional regulatory input. The lease should say who applies, who pays, and what happens if approval fails.
JQ-Properties’ guide on zoning due diligence explains why use and permit feasibility should be confirmed early.
Change Orders and Delays
Buildout budgets often change after drawings, site review, or permit comments. The lease should say who approves change orders, who pays for unexpected base-building issues, and whether delay caused by landlord work extends the fixturing period.
Tenants should also ask whether the landlord can approve contractors slowly, restrict work hours, require specific trades, or stop work for rule violations. These controls may be reasonable, but they should be reflected in the schedule.
Rent Commencement
Rent may start on possession, after a fixturing period, after permits, after landlord work, or on a fixed date. The tenant should understand whether delays extend rent-free time or whether the clock runs regardless.
A fixed commencement date can be risky if permits, landlord work, or equipment delivery are uncertain. The lease should connect rent timing to the commercial reality of opening.
Restoration at the End
The lease may require the tenant to remove improvements, signs, wiring, plumbing, equipment, or specialty installations at expiry. Restoration cost can be significant for clinics, restaurants, fitness users, and daycare-related office or activity spaces.
JQ-Properties’ guide on signage rights explains why installation and removal obligations should be reviewed together.
Business Purchase Risk
If buying a business, confirm which improvements belong to the seller, landlord, equipment lessor, or tenant. Some improvements cannot be removed. Some are fixtures. Some may require landlord approval to transfer.
JQ-Properties’ guide on fixtures vs chattels explains why ownership and attachment can matter, especially when property and business assets overlap.
Questions to Ask
Before signing, ask:
- What condition is delivered?
- What work must the landlord complete?
- What work must the tenant complete?
- Who pays for each item?
- Who gets permits?
- When does rent start?
- Is there an allowance?
- What documents release the allowance?
- What must be removed at expiry?
- What happens if approval fails?
If buildout cost affects viability, get contractor and legal review before committing.
CTA
If you are leasing commercial space or buying a business in Greater Vancouver, JQ-Properties can help organize landlord work, tenant improvement, permit, allowance, restoration, and rent-start questions before conditions are removed.
This article is general information only and is not legal, engineering, construction, leasing, accounting, tax, lending, insurance, or investment advice.
FAQ
Is landlord work the same as tenant improvements?
No. Landlord work is usually delivered by or for the landlord, while tenant improvements are usually built for the tenant’s operation.
Should rent start before landlord work is complete?
That depends on the deal, but tenants should understand the timing risk before signing.
Can tenant improvement allowances be paid after completion?
Yes. Many allowances require invoices, lien clearance, and landlord approval before payment.
Do improvements need to be removed at expiry?
Sometimes. Restoration obligations should be reviewed before buildout begins.
