A Work Letter is a document that outlines the specific construction tasks and responsibilities that a landlord will perform as part of a commercial lease agreement. The work letter defines the standards and conditions of how the leased space will be constructed or finished before the tenant takes occupancy. It details the quality of materials to be used, the timeline for the construction, and the financial responsibilities of both the landlord and the tenant regarding the build-out.
The work letter is a critical component of the lease negotiation process, as it can significantly affect the cost implications for both parties. It often becomes part of the official lease document and can cover areas such as:
- Tenant Improvements (TI): Specific alterations or improvements to the leased space that are tailored to the tenant’s needs.
- Build-out allowances: The amount of money the landlord is willing to contribute towards the construction or improvement of the space.
- Construction standards: The quality and types of materials to be used, and the workmanship standards expected.
- Design control: Who has the authority to approve the design and construction plans—often it’s the landlord, with input or certain approval rights for the tenant.
- Timing: When the improvements will be completed, often tied to the commencement date of the lease.
- Over-budget costs: How overages are handled if the improvements exceed the agreed-upon allowance.
A well-defined work letter helps prevent disputes between the landlord and tenant by clearly stating the expectations and obligations regarding the leased space’s condition at move-in.