construction allowance

construction allowance

As a leasing incentive, an amount budgeted for a tenant to spend on improvements to the space leased.When one is engaged in negotiations, care should be taken to define the tenant's obligations and the landlord's obligations with reference to the construction allowance.Also called tenant improvements allowance or TI for short.

Example: If the lease gives the tenant responsibility for all improvements “below ceiling,” then the considerable cost of adding or replacing ceiling tiles and light fixtures must be borne by the landlord and will not be deducted from the construction allowance. One should also negoti- ate the disposition of any unused construction allowance dollars and provide for their use as a credit against future rent or for them to be retained by the landlord in the account of the tenant and used at some point in the future for rehab expenses such as replacing worn carpet or repainting internal corridors.

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Construction obligations: Your landlord is offering a construction allowance to help you build out your space.
It allows taxpayers to change from improperly having a depreciable interest in property subject to a tenant construction allowance to not having a depreciable interest in such property, or vice versa.
If the tenant owns the improvements, the construction allowance is income to the tenant in the year it is received, and the improvements are depreciated over the appropriate recovery period beginning when they are placed in service.
This concluded that the best way to proceed was on the basis of a two-stage design and build tender, incorporating into the contract sum a design and construction allowance, based upon the application of dual cost risk analysis techniques.
The NFL has established a special construction allowance for its teams, but much more of a private contribution is necessary.
The construction allowance is a 50-percent rent abatement concession that occurs as rent is paid after the six-month, free rent period.
The construction allowance negotiated by Studley will be utilized by TAG to reconfigure and upgrade portions of the space, install a partially redundant HVAC system and purchase new furniture.
Neither Building Two nor Building Three is providing an above-standard construction allowance.
A lessor must capitalize all amounts paid directly or indirectly through a construction allowance to the lessee to improve a unit of leased property where the lessor is the owner of the improvement for tax purposes.
Alternatively, the lessee may receive a construction allowance from the lessor pursuant to the lease in order to build or improve the property.
The lease agreement stated that Y will provide X with a construction allowance in the amount of $1 million for the retail space; it also provides that, to the extent the $1 million construction allowance is spent on qualified long-term real property, it is for the purpose of constructing or improving qualified long-term real property for use in X's business at the retail space located at Y's shopping center.
For example: if a lessee received a construction allowance in January 2004, it has until mid-September 2005 to make the improvements to avoid taxable income.

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