A tenant, 'Tech Innovate Inc.', is negotiating a new lease for office space in Calgary. They require extensive custom built-in cabinetry, specialized electrical outlets, and enhanced security systems. Who is typically responsible for funding these 'tenant improvements' (TIs) and how is it often structured?

Question: A tenant, 'Tech Innovate Inc.', is negotiating a new lease for office space in Calgary. They require extensive custom built-in cabinetry, specialized electrical outlets, and enhanced security systems. Who is typically responsible for funding these 'tenant improvements' (TIs) and how is it often structured?

Answer options:

• The landlord covers all TI costs to attract the tenant, amortized over the lease term.
• The tenant pays for all TIs upfront, as they are specific to their business. ✅ The landlord typically provides a 'tenant improvement allowance,' with the tenant responsible for any costs exceeding this allowance.
• The landlord funds the TIs and then charges the tenant a higher base rent to recover the cost.

Correct answer: The landlord typically provides a 'tenant improvement allowance,' with the tenant responsible for any costs exceeding this allowance.

Explanation: It is common practice for landlords to offer a tenant improvement allowance to contribute to the cost of customizing the space, with the tenant funding any expenses beyond this agreed-upon amount.