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Few topics are as important or complex when negotiating a commercial lease as the Tenant Improvement Allowance (TIA). Sometimes referred to as a Construction Allowance or Installation Allowance, a TIA is a sum a landlord agrees to reimburse a tenant for improving the leased space. It’s a powerful tool that helps tenants build out the space to suit their needs and one that landlords often use to attract and secure long-term occupants.
But while TIAs can be a significant win for tenants, they’re not guaranteed. In fact, TIA payments are typically subject to strict conditions, and if such conditions are not met, tenants risk losing the allowance altogether.
Tenant Improvement Allowance Conditions
It’s common for landlords to condition TIA payments on specific requirements. These include providing final lien waivers from contractors and subcontractors, a certificate of occupancy, proof that construction has been completed in accordance with approved plans, opening the premises, and tenant not otherwise being in default. These conditions must usually be satisfied within a specific time frame, which is typically outlined in the lease. These requirements are not just procedural; they are designed to protect the landlord’s investment and ensure the improvements are done professionally and legally.
TIA Enforcement in Action
Florida law supports the enforcement of such conditional provisions. In the case of Dania Live 1748 II, LLC v. Saito Dania, LLC, No. 23-60960-CIV, 2024 WL 4870501 (S.D. Fla. Nov. 22, 2024), the U.S. District Court for the Southern District of Florida upheld a lease clause that voided a tenant’s right to a $1 million TIA after the tenant missed the deadline and failed to meet the lease’s defined payment conditions.
In that case, the tenant attempted to offset rent owed by claiming the TIA nearly two years after the deadline. The lease clearly stated that the TIA would be forfeited if not claimed within twelve months of the rent commencement date, along with submission of a certificate of occupancy and lien waivers. The court enforced the forfeiture, holding that the tenant had no right to reimbursement.
What This Means for Tenants and Landlords
The Dania Live decision signals that courts will likely uphold forfeiture of TIAs if the lease is clear, and the tenant fails to meet the stated conditions.
If you are a tenant or landlord negotiating a TIA or are unsure how your lease language might be enforced, now is the time to seek legal guidance. Missing a deadline or overlooking a requirement could cost you hundreds of thousands—or even millions—of dollars.
Protect Your Investment
Whether you’re structuring a lease or navigating a TIA dispute, our Florida real estate attorneys are here to help. Contact us today to review your lease terms and ensure your interests are protected.