tenant improvement
Tenant improvement is the work a landlord pays for or allows to fit out a rented shop or office before the tenant moves in and starts trading.
In plain English
"So who is paying for the tiling and the partitioning?" Chidi asked, standing in the empty shop unit on the ground floor of a new plaza in Lekki. "That one is on the landlord," his cousin Nkem replied. "It is called tenant improvement. They already agreed it in the lease before you signed anything."
Chidi had signed a five year lease for his boutique and assumed every kobo spent on making the space usable would come from his own pocket. He was surprised to learn that many landlords, especially in commercial buildings, budget money specifically to prepare a unit for a new tenant. This could mean fitting electrical wiring, putting up ceiling boards, laying tiles, or building the changing rooms he needed for his boutique.
Tenant improvement, sometimes shortened to TI, is any customisation or fit out done to a rented commercial space to suit the tenant's business, and it is usually negotiated as part of the lease. Sometimes the landlord does the work directly. Other times the landlord gives the tenant a fixed allowance, say ₦2,000,000, and the tenant hires the contractors and manages the job themselves.
In the United Kingdom, this shows up often in retail leases on high streets, where a new coffee shop tenant might negotiate a rent free period plus a contribution towards shopfitting before they open their doors. A Nigerian landlord doing the same in Victoria Island or Ikeja is playing the same game, just with different currency and different contractors.
The amount and scope of tenant improvement usually depends on how much bargaining power the tenant has. A big brand signing a ten year lease across three floors can push for a generous allowance. A small business signing a short lease may get little or nothing, and might need to negotiate hard just to get the landlord to paint the walls before handover.
A landlord agrees to give a new restaurant tenant a tenant improvement allowance of ₦3,500,000 to install a kitchen extraction system, tile the floors, and fit new lighting, with the cost deducted from what the landlord would otherwise have spent maintaining the space between tenants.
Questions people ask
Is tenant improvement the same as renovation?
Not quite. Renovation can happen anytime and for any reason, while tenant improvement specifically refers to fit out work tied to a lease agreement, usually done or funded before or shortly after a new tenant moves in.
What happens to tenant improvements when the lease ends?
It depends on the lease terms. Some improvements, like fitted partitions or wiring, stay with the building and benefit the next tenant, while movable items the tenant installed, like shelving or signage, may need to be removed.
Can a tenant ask for cash instead of the landlord doing the work?
Yes, this is common. The landlord gives a tenant improvement allowance as a set sum, and the tenant manages the fit out themselves, though landlords often prefer to control the work directly to protect the building's standard.
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