How do you treat tenant improvements?

Question

I gave my tenant permission to make an improvement to the building. I didn't think anything of it because it seemed like a minor request at the time. I saw the improvement the other evening and I was very happy with the results and installation. I like it so much I'm thinking I should reimburse the tenant for the cost. This is my first time dealing with a tenant improvement and I'd like to know how other landlords handle it. I never thought to improve the building in this way since it does not benefit me at all. It was strictly done for their benefit. Thanks!

Henry T. · Answer

You already did him a favor by allowing it. Stay out of it. Generally, tenants should not make improvements, ever. AND definately not without written and detailed permission, and who owns it. When he leaves he'll be ripping it off the wall with no concern for your building. You gave no details, just saying, Be careful.

Andrew Weiner · Answer

I would not reimburse the tenant.  It sets a precedence that they can seek reimbursement from you without prior approval.  Even though things might be great now you have to hedge for the future that they could be resentful if you don't decide to pay them back for something else they do.  Maybe just a recognition that it looks great and you appreciate their keen eye or skills.

Ned J. · Answer

The best rule to live by is to NEVER let tenants do improvements on a DIY basis..... EVER...

Any modification or improvements are to be pre-approved and done by a professional that I choose- and I'm only going to do them if it a safety or habitability issue. If its some cosmetic improvement its unlikely I'm going to approve and pay for them.

If its a cosmetic issue, I will approve a contractor but not pay the cost of the work

DO NOT fall into the trap of a tenant making changes and then paying them back... it will escalate and be almost never ending.

Eric Gerakos · Answer

I don’t allow my tenants to make “improvements” because they may do some shoddy work that I will have to pay to fix later.

Michael Smythe · Answer

How much will you pay me to improve your post here?

Not that you will get anything out of it, but if you want to give money away, I'll take some!

Get the point?

Wesley W. · Answer

It's almost never a good idea to have tenants do their own improvements, for the reasons mentioned as well as the potential liability exposure you'll have to a personal injury claim.

If the improvement the tenant wants is something you think will be valuable in marketing the unit in the future, you should sign a written MOA with the tenant, outlining the terms.  I typically have the tenants pay me for the retail price of the materials, and I contribute the labor.  But upon completion, the improvement becomes part of the building and the tenant concedes any ownership.  Here's an example:

THIS ADDENDUM IS HEREBY MADE A PART OF THAT CERTAIN LEASE AGREEMENT EXECUTED ON  March 1, 2015  BETWEEN John Smith (“Tenants”) AND  Joe Jones (“Agent for Owner”)

Rental Unit Address:   (here)

At Tenants’ request, Property Manager will install a screen door on rear doorway of Tenants’ unit (Apartment 1S).

Tenant will submit payment in advance for materials purchase, and Property Manager will purchase materials after payment is made.  Labor for installation will be provided by Property Manager.

Upon installation by the Property Manager, the screen door becomes the sole property of the Landlord.  If/when Tenants vacate the rental unit, the installed screen door will remain as part of the Premises and no reimbursement to Tenants will be issued.

Peter W. · Answer

If they ask about reimbursement I would say something like I need a quote, purchase agreement and receipt in case I get audited in order to pay them. You probably don’t actually need all those things (not an accountant) but it lets them know they need to follow the process and be formal about it.

Michael Dumler · Answer

@Carl W., what was the improvement/installation?

Carl W. · Answer

Thank you! My tenant would definitely be the type to attempt to take advantage of my generosity in the future. I'll write an email expressing my appreciation. I love that idea. :)

Bob Stevens · Answer

Say thank you ,

How do you treat tenant improvements?

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