Understanding Build-Out Agreements

As part of a new commercial real estate lease, landlords are often willing to build out a space or provide a credit (in the form of free rent or a work-letter) that is applied towards a build out. The extent to which a landlord will build out a space for a new tenant is negotiated between the tenant’s broker and the landlord’s leasing agent.

If the tenant requires above-standard materials or finishes (that exceed the cost of “building standard”), the tenant is responsible for paying for the difference in cost between building standard and upgraded materials and finishes.