Chapter 26 - § 26.10 • WHO PAYS FOR THE WORK?

• Jurisdiction: Colorado

§ 26.10 • WHO PAYS FOR THE WORK?

The work letter typically specifies who pays for the work. The landlord typically pays for the landlord's work, and the cost is included in the base rent paid by the tenant. An allowance for the tenant's work also is often included in the base rent. Amounts above the tenant's allowance are paid for by the tenant in advance or, if the landlord will allow it, as the work is performed or after the work is complete. Sometimes the landlord will finance amounts for the tenant's work by increasing the base rent to cover the additional amount. The landlord will take the total additional cost, add an interest factor, and amortize the total amount over the initial term of the lease, increasing the base rent accordingly.

§ 26.10.1—Allowances

Allowances are usually granted as so many dollars and cents per rentable square foot of leased premises. Amounts vary greatly depending on the type of lease, the size of the premises, and the level of tenant finish that is standard in the building and that the tenant desires. Sometimes, however, an allowance is just a fixed dollar amount the landlord is willing to pay and the tenant is willing to accept. Of course, market conditions also greatly affect the amount of the allowance.⁷

§ 26.10.2—Restrictions on Allowances

The landlord often limits the items on which the allowance can be spent. Sometimes the allowance is limited to hard costs (labor and materials). Sometimes the tenant also may use its allowance for soft costs, such as space planning, architectural costs, and insurance. Some landlords give their tenants greater flexibility and permit the allowance to be used for telecommunications systems and even furniture. The latter approach is rarer because these uses of the allowance do not create value in the building, as is the case, at least to...