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Including leasehold improvements in a commercial lease

On Behalf of | Dec 30, 2018 | Commercial Real Estate |

When Orange County business owners look for a space in which to do business, they may not find the perfect setup. For this reason, many prospective tenants like to include leasehold improvements as part of a commercial lease. These improvements can quickly get out of control financially, and careful consideration should be given to them.

Many people become confused regarding the terminology for improvements to rental spaces. Orange County entrepreneurs who are new to the commercial rental market could hear about leasehold improvements, build-outs and tenant improvements. While it may seem as though they are different, they generally are not. It simply depends on who you are and what terminology is used.

One caveat to the use of terminology resides in the definition of building improvements. These are actually changes to the entire structure, not just the space in which tenant will operate. If these types of improvements are listed in a commercial lease, the future tenant needs to obtain clarification from the property owner, especially if the owner expects the tenant to pay for them. Another word of warning has to do with making too many leasehold improvements at a time. Customizing a space can quickly become expensive and even cost-prohibitive when starting a business.

Leasehold improvements are just another facet of a commercial lease open to negotiation by the parties. In order to ensure that the tenant receives the best value from conforming a space to his or her needs, the plans, costs and other aspects of them requires a thorough review. Negotiating the best possible deal is often the name of the game when it comes to renting commercial space, and making changes to it to suit the tenant’s needs is an important part of that process.