Tenant improvement (TI) clauses are a key part of commercial lease negotiations—especially for developers delivering new construction in North and South Carolina. A well-drafted TI clause protects your investment, ensures buildout quality, and helps you avoid disputes with future tenants.

Below, we cover essential legal strategies developers should use when negotiating TI provisions.

What Are Tenant Improvements (TIs)?

Tenant improvements refer to interior buildouts that adapt a commercial space to a tenant’s specific needs—like office layouts, restrooms, lighting, HVAC, and more.

Developers typically offer a TI allowance (a set amount per square foot) to cover these costs. The structure of that allowance is where legal risks can arise.

TI Allowance Structures: What Developers Should Know

  • Turnkey Buildout:
    The developer handles all construction and delivers the space move-in ready. You carry more risk, but maintain control over design, cost, and timeline.
  • Fixed Allowance:
    The tenant handles construction and uses a pre-negotiated amount from the landlord. This is common in the Carolinas and shifts design responsibility to the tenant.
  • Reimbursement Model:
    The tenant pays upfront, and you reimburse them after verifying receipts, lien waivers, or occupancy.

Tip: In both NC and SC, you’ll want strong language to protect against lien claims and delayed occupancy due to tenant-managed buildouts.

Legal Strategies for Strong TI Clauses

1. Define Tenant Improvements Clearly

Specify exactly what the allowance can and cannot be used for—such as HVAC, lighting, design fees, or permitting costs.

2. Establish Approval Rights

Retain the right to review and approve plans, contractors, and materials. This ensures the buildout meets code and aligns with the rest of the property.

3. Require Lien Waivers

In NC and SC, subcontractors can file liens even if you didn’t hire them. Always require lien releases before making payments.

4. Address Defaults and Leftover Funds

If the tenant defaults, clarify that unused TI funds revert to the landlord. Also state whether unused allowances can be converted to rent credits or expire.

Local Considerations in North & South Carolina

  • North Carolina:
    Mechanics’ lien laws require strict notice and documentation. Ensure lease language aligns with NC statutes to avoid exposure. Consult with an NC attorney about this.
  • South Carolina:
    Courts tend to enforce lease language strictly. Be clear about deadlines, obligations, and remedies if TI work isn’t completed properly.

Protecting Your Bottom Line

TI clauses are often overlooked—but they can cost developers time, money, and legal headaches if not handled carefully. A well-drafted clause can speed up occupancy, reduce construction delays, and prevent disputes with tenants down the road.

Need Help with TI Clause Negotiation?

Our commercial real estate attorneys work closely with developers across the Carolinas to draft, review, and negotiate tenant improvement provisions that protect your interests from day one.

Contact us today to schedule a consultation or request a lease review.

Disclaimer:
This blog post is for informational purposes only and is not intended to provide legal advice. Reading this content does not create an attorney-client relationship between you and [Your Firm Name]. You should not act or rely on any information contained herein without seeking the advice of an attorney licensed in your jurisdiction.

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