Landlord Work vs Tenant Improvements: Define Scope and Handover

A commercial buildout agreement needs more than a landlord-work list and a tenant-work list. It must explain where one contractor's responsibility ends, what the next contractor can rely on, who funds each stage and what happens when the promised starting condition is not delivered.

A tenant improvement allowance answers a different question: how much qualifying cost the landlord may contribute under agreed conditions. It does not necessarily pay the contractor when the contractor needs payment, cover every project item or transfer responsibility for delivering the work.

Before comparing offers, put scope, handover standards and allowance cash into the same discussion. This guide uses BC commercial premises and Vancouver approval examples, with official sources checked September 8, 2026. The invented budget below is not a construction estimate.

Replace shell labels with a usable starting condition

“Warm shell,” “turnkey” and “as-is” can mean different things in different negotiations. Identify the actual condition promised: walls, floor surface, service connections, washrooms, life-safety systems, access and the documents needed to begin the tenant's project. Distinguish an existing item from a tested, suitable item.

For example, an electrical panel may exist without enough usable capacity for the proposed equipment. A plumbing connection may be available but located away from the tenant's layout. Record what the landlord will change and what the tenant must investigate or extend. A photograph establishes appearance, not capacity.

Attach coordinated plans and a written work description where the parties agree to them. Include specifications or performance criteria that a qualified reviewer can assess. “Working HVAC” should prompt a discussion of the actual service, areas served and intended operating conditions, not an assumption that the system supports any future layout.

BDC recommends discussing renovation plans during lease negotiations and making the lease or addendum clear about the work and removable assets. Its guidance distinguishes a cash allowance from work managed and paid for by the landlord. Those arrangements should not be treated as interchangeable offers. BDC on leasehold improvements.

Define the handoff between work packages

Assign a complete deliverable rather than only a trade name. “Electrical: landlord” leaves open whether that means service to the unit, distribution within it, equipment connections or testing. Separate those items and identify who coordinates the connection between them.

The same issue arises when a landlord removes flooring and a tenant installs the replacement. Who provides a surface meeting the installer's specified tolerances? Who investigates an unexpected condition? If both quotes exclude preparation, the apparent division leaves an unfunded gap. Do not decide that gap by assuming it belongs to whichever contractor arrives second.

A useful allocation has a starting condition, a finished deliverable, a payer, a person procuring the work and a person confirming the handoff. The landlord may procure a task but charge it to the tenant; the tenant may procure another task that qualifies for reimbursement. “Who arranges it?” and “who ultimately pays?” need separate answers.

Record exclusions with the same care as inclusions. If equipment commissioning, controls integration or patching around new penetrations is excluded, identify the party that will carry it. An allowance percentage does not cure a missing work package.

Read the work letter with the main lease

A publicly filed April 6, 2015 Vancouver office lease between Poplar Properties and Zymeworks provides a concrete illustration. Schedule F uses an as-is starting point while listing specific landlord work for Suite 610, including demising the space and separating services, removing flooring and providing matching ceiling tiles. Tenant work follows a separate approval procedure. Filed lease, Schedule F.

The same document's allowance provisions exclude equipment, furniture, trade fixtures and communications installations and impose payment conditions. The useful lesson is to read the scope and contribution provisions together; this historical deal does not set today's standard allocation, amount or payment timetable.

Contractor clearance can also affect the starting date. Schedule E of that historical lease requires plans, permits, insurance evidence and workers' compensation clearance before work, and allows landlord-selected contractors for certain building systems. For your project, identify the actual contractor-approval requirements, any required deposit and the time needed to satisfy them before booking the crew. A contractor's available date does not establish permission to start. Do not copy this old lease's insurance limits or approval deadlines into your own budget. Filed lease, Schedule E.

In your own package, check which schedule controls if documents conflict, and whether later amendments changed the premises or the work. A contractor's proposal is not automatically incorporated into the lease because someone emailed it during negotiations. Ask the parties to identify the agreed version and the approvals still outstanding.

Follow the allowance from eligibility to receipt

First establish the maximum contribution and its measurement basis. Then check eligible costs. Design fees, permits, landlord coordination charges, equipment, taxes or furniture may receive different treatment under the actual agreement. Do not apply the allowance to an item simply because it appears in the overall opening budget.

Next identify the conditions and submission requirements: approved plans, invoices, proof of payment, completion confirmation or other specified documents. Record any deadline, deductions, conditions related to tenant performance and treatment of unused funds. A maximum allowance is not the same as an accepted reimbursement request.

Finally, establish when funds are due and how they arrive. Direct payment to a contractor, reimbursement to the tenant and a rent credit have different cash effects. If the contribution is recoverable by the landlord in specified circumstances, include that obligation in the longer-term review rather than describing the money as unconditionally free.

BC's Builders Lien Act separately addresses holdbacks, completion certificates and release periods. A contractual allowance condition and a statutory holdback are not the same thing. Have the payment schedule coordinated with the applicable legislation; do not invent a release date from the word “complete.” Builders Lien Act, sections 4–8.

A $40,000 allowance does not make this a $50,000 cash project

Consider a hypothetical agreement with $25,000 of distinct landlord work paid directly by the landlord. The tenant has $70,000 of eligible improvement cost and $20,000 of ineligible furniture and equipment. The allowance is capped at $40,000 and, under these invented terms, is paid only after the tenant has paid its project costs and satisfied the agreed conditions.

The tenant's defined project outflow is $90,000. The expected contribution is the lesser of $40,000 and $70,000, so $40,000. The tenant's eventual net cost is $50,000. The landlord's separate $25,000 is not another deduction from that $90,000: it was never included in the tenant's outflow.

Suppose the tenant's cash sequence is $20,000, then $35,000, then another $35,000 before the allowance arrives. Cumulative funding required reaches $20,000, $55,000 and $90,000. After receipt of $40,000, the net amount funded falls to $50,000. The tenant still needed access to $90,000 before that receipt.

This simplified sequence assumes payments occur when lawfully due, including proper handling of any applicable holdbacks. It does not set construction payment dates. It excludes tax, financing charges, rent, operating cash, contingency and business receipts; those need additional lines in a real opening budget.

Now identify an omitted service connection. Until its scope, payer and price are settled, the project total remains incomplete. If the parties subsequently agree that the tenant must pay an additional $6,000 before reimbursement, and the allowance cap stays unchanged, tenant outflow becomes $96,000 and net cost $56,000. The allowance has not increased just because the work did.

For that change, record who can authorize the revised work, its price and its effect on the handover date. A site instruction from someone coordinating access is not necessarily approval to charge the tenant. Get the revised allocation and any allowance eligibility resolved through the agreement's change procedure before treating the additional work as an authorized commitment.

The work-scope and allowance workpaper (PDF) contains this allocation, cash sequence and a blank handoff record. Use it to distinguish a priced exclusion from an unresolved one, and a requested contribution from cash received.

Connect delivery, approvals and delay consequences

Name the event that makes the premises available for tenant work. Is access exclusive, shared with another contractor or restricted to certain hours? Identify which landlord deliverables must be complete first, who confirms them and how remaining deficiencies are recorded.

Vancouver generally lists commercial renovations and tenant improvements among work requiring permits. An agreement about the payer does not replace that process. Assign responsibility for applications, supporting designs, inspections and response to comments, while preserving the separate approvals that may apply to the project. When a permit is needed.

Keep construction access, contractual delivery and lawful occupancy distinct. Vancouver's occupancy guidance addresses commercial spaces and makes use subject to the issued permit's terms; the associated building permit and City determine the project-specific requirements. A landlord's handover acknowledgement is not an occupancy permit. City occupancy process.

If landlord work slips, ask what changes in the tenant schedule and which contractual remedies apply. Tenant changes, permit comments and supplier delays may receive different treatment. Record notice requirements and any agreed extension or outside date. Do not assume delayed opening automatically stops rent; distinguish the fixturing period and free rent by checking when access, base rent and additional charges each begin under the actual agreement.

Make completion useful after the contractors leave

The handover package should identify outstanding work, test or commissioning records where relevant, warranties, operating information and who pursues deficiencies. Distinguish a cosmetic item that can be corrected later from work that prevents safe or permitted use. The contract and authorities—not the budget subtotal—determine the consequences.

Check ownership, removal rights and restoration obligations for the installed items. In a business purchase, do not assume the seller owns everything visible or that an unclaimed allowance automatically transfers to the buyer. Examine the lease, asset documents and any financing or equipment arrangements. Avoid importing residential fixtures advice into a commercial allocation. In a business purchase, the commercial lease-assignment guide covers the separate question of landlord consent to the transfer; acceptance of construction work does not itself establish that consent.

A lease-end restoration plan should identify which installed items must stay or be removed, who can require that work and its separate cost. At the negotiation stage, the immediate objective is a scope that can be built, a handoff that can be checked and enough funding to reach the contribution's actual payment point.

When comparing a commercial premises or business purchase, JQ Properties can help organize the work-scope and landlord questions around the handover and funding you need.

By Justin Qiao, Personal Real Estate Corporation, Justin Qiao Group | RE/MAX Crest Realty.

Sources checked September 9, 2026.