Tenant installations Gauteng/Cape Town/Durban
What is a tenant installation?
A Tenant Installation is the building/constructing and interior makeover of a leased space in order to customise and/or make it more suitable to the Tenant’s image, trading needs and to convey the Tenant’s corporate image to visitors.
It is commonly referred to as a “TI” in the commercial and retail Property Management business. A Landlord will lease a space to a Tenant with “Standard Finishes” at its cost. Such a space is also known as a “white box”. The Tenant will then change or customize the space to its needs before trading. That is for the Tenant’s account with the assistance of the Tenant Allowance from the Landlord. However, in most lease agreements, it is the responsibility of the Tenant to restore the space to its “Standard Finishes” condition at the end of the lease agreement or when the Tenant vacate the space, at its cost. The so called “reinstatement clause”.
The Tenant must ensure to have the specific Landlord’s prescription of the tenant installation process before wasted cost is incurred as some Landlords will only allow tenants to use “Landlord approved contractors”. In many cases there are good motivation for that. The office block or shopping centre could only use one contractor for the air conditioning or fire-fighting equipment.
Tenant Installation items would generally include items like specific paint colour, wallpaper, floor coverings, dry walling, glass partitioning, counters, ceilings, signage and lighting
What does “Tenant Installation Allowance” mean?
A Tenant Installation Allowance (TIA) refers to an allowance afforded to (or granted to) the Tenant by the Landlord to assist the Tenant in fitting out and customizing a leased space, normally in an office block or shopping center.
The longer the period of the signed lease, the more lenient a Landlord will be to afford a Tenant Installation Allowance and/or increase the amount.
This allowance can also be provided to the Tenant in the form of a rent-free period. The Tenant can then use this “saved rent” to spend on its installation.
Landlords do have different methods of calculating a Tenant Installation Allowance and no two Tenant Installation Values are “worth” the same, but a general rule of thumb is that it will be one month’s rental for every year of the lease.
Who is responsible for painting, the Landlord or the Tenant?
This would purely depend on what is stated in the lease. Generally, in commercial property leases, the Tenant is responsible to reinstate the space to standard finishes (also referred to as white box) at the end of the lease when the Tenant is vacating. This indicate that the Tenant is responsible for painting.
If it is not specifically stated in the lease agreement, the Landlord cannot held the Tenant responsible or liable for painting unless the property has been damaged.
What is the difference between substantial completion and final completion?
Final completion means that all of the contract specifications and scopes of work have been completed.
Substantial completion means the structure has been completed but there is still an outstanding list of items that needs to be done or adjusted.
When there is agreement that final completion has been reached, the architect will issue a “final completion certificate” which is a legal document verifying that all requirements of the project has been fulfilled and that the project is ready for final payment.
Substantial Completion is the stage in the progress of Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so the Owner can occupy or utilize the Work for its intended use. Note the words “sufficiently complete”.
How much is tenant improvement allowance?
Tenant Improvement Allowance — Negotiating is key…. The tenant improvement allowance is the amount a landlord is willing to spend so that the tenant can retrofit or renovate the leased space. It is usually expressed in a per-square-metre or total sum. This amount is decided upon during lease negotiations.
A Tenant Improvement Allowance can be seen as an incentive offer from a Landlord, especially in a market where there is more space than tenants to fill it.
Tenant’s goal should be, during negotiations with the Landlord, to get an allowance equal to cost of planned improvements. How much the Landlord will be willing to cough up for a TI allowance depends on the tightness of the market (a Tenant market yields better TI sums), the value of the Tenant and the extend to which the build-out improves the property.
Some ways to assist a Tenant in negotiating a better Tenant Improvement Allowance:
- You should always ask for a cash allowance first, and then settle for a tenant improvement allowance second.
- Generally the landlord offers half of what is actually required.
- Ensure whether the amount include or exclude value added tax
What is substantial completion certificate?
This certificate of substantial completion can be used by a contractor to guarantee that work has been completed on a construction project in accordance with the contract documents and only minor items remain.
When a project is substantially completed, the project is completed enough for intended usage except for a few minor deficiencies. This comes to roughly 97% completion of the work outlined in the construction contract.
Is a certificate of completion the same as a certificate of occupancy?
The short answer is ‘no’. Lets look into more detail:
The Certificate of Occupancy is issued only once the building has been completed in all respects and can be occupied. So, the main difference between Completion certificate & Occupancy Certificate is that Completion Certificate shows that the building construction is done as per the plan which was approved by the concerned authorities.
A Certificate of Completion is proof that a structure or system is complete and for certain types of permits is released for use and may be connected to a utility system.
A Certificate of Occupancy must be obtained from your local Municipality. Upon termination of the construction, the builder or the owner of the building has to request for the Completion Certificate to the local municipal authority.
If the building is completed as per the building approval form and if it satisfies other building criteria such as the distance from the highway, the height of the construction, fixation of rainwater harvesting system, etc., then the concerned authority will issue the Completion Certificate.
Importance of obtaining an Occupancy Certificate:
- Claiming income-tax benefits on your home loan along with the home loan statement.
- Serving to adhere to the approved plans of the building.
- Provides legal recognition for occupying a property.
- Helps to get a water connection/ sanitary connection or electricity supply connection.
- Required when the buyer requests for a house loan towards a property.
- Helpful at the time of property purchase or property selling.
- Assistance for an individual in obtaining the copy of the registered deed.
