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Questions on Tenant Improvement Laws

Tenant improvement refers to the negotiated sum the owner of a property is willing to spend to make interior changes for the needs of a particular tenant. These needs could include, and is not limited to, floor and wall coverings, partitions, fire protection, security systems, etc. The alterations are made to meet the functional needs of the tenant and, therefore, the improvement costs may be negotiated between the landlord and the tenant. Below are some of the top questions on laws related to tenant improvement, where Legal Experts explain the rights and obligations of both parties involved.

The landlord gave us keys to the commercial space we rented in April 2011, though we could not occupy the building till after June 2011 since it was not yet ready. However, we are being asked to pay rent starting from April 2011. What should we do?

In this case, the landlord was in breach of the lease agreement as he did not make the premises fit and available for occupation in the agreed condition. It follows that you would not owe rent on premises not compliant with the lease agreement. Your options would be to try and reach an agreement with the landlord to revise the commencement date and the amount to be paid. If this does not work out, you may either wait to be sued or sue the landlord for breach due to the delay in making the premises available for occupation.

As landlords, can we charge a tenant rent during the time the building is being built, or before a Certificate of Occupancy is granted by the City/State?

This would depend entirely on the terms of your lease agreement. Such an agreement typically has a lease date, a commencement date, and an opening date. The commencement of rent collection depends on the terms negotiated on these three dates. You may rent a ready-to-go space with all the tenant improvements built into the premises, or you may rent a shell where the tenant does the improvements. In the latter case, a Certificate of Occupancy (C. O.) will not be issued unless all improvements are completed, but the rent can start before the C. O. is obtained.

Our property, which was on an “as is” sale, was given to a couple on a "Rent to Own" type contract so they could complete tenant improvements to the property. They changed their minds mid-way and left us with $1800 in damages to our property. Now, they are threatening to lien our property so that we are unable to sell unless we pay their $1000 deposit back. What are our options here?

If the couple files a lawsuit against you, you will be served with summons where you will be able to contest the facts of their lawsuit. Typically, a lien on a property will be effective only when the complainant obtains a judgment against you. However, in order to obtain the judgment, they will have to prevail on the complaint filed against you in the small claims court.

I have had a commercial space lease with renewals every 3 years for the past 20 years. However, after the owner passed away, my lease has not been renewed by the new landlord though I have been paying rent as per the old lease. Can I consider renewal as though I were a new tenant for improvements?

Since your lease term has expired, you would now be considered a month-to-month tenant and your lease can be terminated with a written notice prior to the end of a monthly rental period. Thus, when you negotiate a new lease, which you are entitled to do, you may negotiate for tenant improvements that the landlord would have incurred anyway in a new lease, or you may negotiate for a lowered rent in lieu of such amount not being spent.

My landlord changed the lease agreement terms at the time of signing and has rented out the commercial space to me on an oral agreement. Now, he wants me to leave behind nearly $3000 worth of improvements after only 6 weeks of occupancy. What can I do?

If your landlord tried to change the terms that you agreed upon in an oral agreement and presented a different written agreement instead, you would be able to file a suit based on breach of contract. You will be able to state that there was an understanding that you would remove the improvements installed by you and return the place in the condition it was prior to you moving in. You may also claim that you were falsely induced to make improvements, which the landlord is trying to benefit from.

A sensible option may be to remove your improvements without the landlord’s approval and wait for him to sue you. You are allowed to take your trade fixtures along with you upon eviction.

Often, tenant improvements require the permission and cooperation of the landlord. If the tenant has made improvements specifically to suit his/her commercial or residential needs that are attached to the building or premises, it may be hard to remove the fixtures if the tenant is evicted. A dispute between the tenant and the landlord too may impact tenant improvements. If you are in a dispute concerning tenant improvements, get in touch with a Legal Expert to understand your rights.
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