Tenant Improvement Work Letters Explained for Office and Retail Leases
Signing a lease feels like the finish line, until the buildout starts. We’ve seen it happen more than once: a tenant is excited about a new office or retail space, the numbers look good, and everyone assumes construction will be “pretty straightforward.” Then a question pops up like, “Wait… who’s paying for the sprinkler changes?” or “Is the space being delivered as a shell or finished?” That’s where the Tenant Improvement (TI) Work Letter comes in. It’s not just paperwork. It’s the part of the lease that sets the rules for the buildout, the budget, and the timeline.
Key Takeaways
A Tenant Improvement Work letter is a part of the lease that clearly states what gets built, who builds it, and how the process is handled.
A TI allowance can sound generous, but it only helps if the work letter matches the real construction scope and responsibilities.
Delivery condition matters because “shell,” “as-is,” and “vanilla shell” can lead to very different project costs and timelines.
The approval process and permit requirements can slow a project down if they aren’t mapped out and followed early.
Office and retail TI work letters share the same structure, but the biggest risks and pressure points are not the same.
9 Components of a Typical Tenant Improvement Work Letter
Below are the nine sections that are usually important in the TI work letter.
Scope of Work
This section defines what’s included, what’s not, and what’s assumed to already be in place.
Here are the scope details we always want clearly written:
Who handles demolition, especially in second-generation spaces.
Electrical service provided vs what must be added for the new layout.
HVAC expectations, including whether new ductwork is needed.
Fire protection changes required by new walls or code.
A clear scope keeps everyone aligned before commercial construction starts.
2. TI Allowance
The TI allowance is the landlord’s contribution toward improvements, often shown as a lump sum or $/SF.
Before counting on it, we confirm what it can be used for.
A TI allowance may or may not include:
Design costs (architect/engineer)
Permit and inspection fees
Landlord-required upgrades
General conditions or project management
Also, the timing of reimbursement matters, as tenants may pay first and be reimbursed later.
3. Delivery Condition / Premises Turnover
This explains the condition of the space when the tenant receives it, which affects the initial Tenant Improvement Work budget and timeline.
Common delivery conditions include:
As-is: unchanged, including existing issues
Shell: unfinished interior
Vanilla shell: common in retail, basics included (varies by lease)
Second-generation space: prior buildout may or may not be reusable
We always recommend confirming system condition at turnover, not just assuming it’s ready.
4. Plans + Approval Process
Construction starts after plans are prepared and approved, not just when the lease is signed.
Most TI projects follow this flow:
Layout concept is created.
Permit-ready drawings are produced.
Landlord reviews for standards and compliance.
Plans go to the city for permits.
Approval timelines should be clear, since delays here can push move-in or opening goals.
5. Schedule + Milestones
The schedule should outline clear project steps so everyone knows what happens next.
Typical milestones include:
Plan submission date
Landlord review window
Construction start
Substantial completion
Final completion/closeout
We also plan around lead times, since some materials can take longer than expected, even on well-planned remodeling services projects.
6. Permits + Inspections
Permits make the work legal, and inspections often determine when a space can be occupied.
The work letter should clearly assign responsibility for:
Pulling permits
Paying fees
Scheduling inspections
Handling corrections
A space can look finished, but still not be usable without final approvals.
7. Change Orders + Cost Tracking
Change orders document changes after the scope is set, usually affecting cost and schedule.
Most changes fall into these buckets:
Tenant-requested changes.
Unexpected site conditions.
Required upgrades tied to standards or code.
A transparent process helps prevent confusion and budget surprises during a commercial renovation.
8. Insurance + Safety Requirements
This section outlines insurance coverage and job-site rules before work can begin.
Common requirements include:
General liability
Workers’ comp
Additional insured wording for landlord/PM
Safety and access rules
Building rules, like after-hours work or elevator restrictions, can also shape the schedule.
9. Punch List + Closeout
Punch list and closeout are the final steps to finish strong and avoid move-in issues after Tenant Improvement Work.
Closeout usually includes:
Final walkthrough
Punch list completion
Warranty details
Required final documentation
This section helps prevent unfinished items from becoming ongoing headaches after move-in.
Office TI Work Letters vs Retail TI Work Letters
The differences in these two usually come down to operations, customer-facing requirements, and the strictness of the opening timeline.
Office Work Letters: Where Details Matter Most
Office buildouts are less about “big construction” and more about making the space comfortable and practical for teams. Small details can affect how the space feels and functions every day.
Office TI work letters should clearly address:
HVAC performance and zoning so conference rooms don’t run hot or stuffy.
Power and data needs for workstations, printers, and IT equipment.
Acoustic expectations for privacy in meeting rooms and open areas.
Building access rules when work happens near occupied suites.
Retail Work Letters: Where Delays and Inspections Hit Hardest
Retail TI projects are often driven by one goal: opening on time. That means approvals and inspections can make or break the schedule.
Retail TI work letters usually focus on:
Storefront and signage standards set by the property.
ADA requirements for customer access and restrooms.
Fire/life safety approvals tied to occupancy.
Work hour limits that affect deliveries, noise, and weekend work.
Conclusion
A Tenant Improvement Work letter is where the lease turns into a real construction plan. It’s the section that decides how the space is delivered, what the allowance actually covers, and how the project moves from drawings to approvals to a finished buildout.
At Emgee Contracting, we’re used to coordinating office and retail improvements with real schedules and real constraints. If you’re planning a buildout, we’re happy to talk through your plans early and help you avoid surprises.
FAQs
1) What is a Tenant Improvement Work letter in a lease?
A Tenant Improvement Work letter is a lease document that explains the buildout rules, including scope, timeline, approvals, and financial responsibilities. It helps landlords and tenants agree on what gets built and how the process should run.
2) Is the TI allowance the same as the total construction budget?
No. The TI allowance is only the landlord’s contribution toward improvements. The actual project budget can be higher once permits, upgrades, specialty systems, and tenant-requested finishes are included. The work letter explains what’s truly covered.
3) What’s the difference between “shell,” “as-is,” and “vanilla shell” delivery?
These terms describe the condition of the space upon delivery before tenant work begins. “As-is” means no changes. “Shell” is unfinished. “Vanilla shell” usually includes basic buildout items, but details depend on the lease.
4) Who usually handles permits and inspections for TI construction?
In many cases, the tenant’s construction team manages permits and inspections, but the lease work letter must confirm responsibility. Since permitting affects legal occupancy, it’s important to define who pulls permits, pays fees, and schedules inspections for commercial remodeling.