What is a tenant improvement allowance?

A tenant improvement allowance — TIA — is the dollars a landlord commits to build out the premises to the tenant's spec. The headline figure is rarely the delivered value: caps, build-out control, amortization, and recapture clauses each reshape the number before it lands. Holdmark extracts the TIA clause from the uploaded lease PDF and binds every figure to its page and section, so the audit trail reads as a verification step, not a guess.

The landlord's contribution to the build-out — distinct from free rent, moving allowance, or base rent.

A TIA is not free rent (a base-rent abatement over a stated period), not a moving allowance (a fixed sum toward relocation costs), and not a base-rent concession (a reduced rate over the term). It is a capital contribution the landlord makes — directly through its own contractor or indirectly through tenant billing — to bring a shell or second-generation premises to a usable state for the incoming tenant.

The clause sits in the work-letter section of the lease and reads as a single number per square foot, but the number that matters lives four clauses away: amortization, recapture, the schedule-of-values approval path, and the unused-allowance election. Where the language reads ambiguously, a structured abstract surfaces the field as ambiguous rather than resolving it silently; the audit trail is the deliverable.

Per-sqft caps, build-out control, amortization, and recapture — each with its own failure mode.

Per-sqft cap

A stated dollar amount per rentable square foot — the spend ceiling.

A TIA names a per-sqft figure (commonly $30–$80 for office, weighted higher for lab, medical, or cold-shell retail) and a rentable square footage figure, so the headline allowance resolves to a number. The figure is the ceiling, not the floor: any spend above the cap is the tenant's, and any spend below it can be pocketed by the landlord depending on the unused-allowance clause.

Flag: Confirm the figure is per rentable (not usable) square foot, the rentable figure the cap multiplies against, and what happens to money left on the table at completion.

Landlord vs. tenant build-out

Who owns the work — the landlord's contractor, the tenant's, or a hybrid.

Some TIAs fund work the landlord performs through its general contractor (cleaner handoffs, faster close, but the landlord controls scope and pricing). Others let the tenant hire its own GC and bill back against the allowance against landlord-approved scope. A third hybrid pays the tenant-run work but only against pre-approved schedules of value.

Flag: Confirm who holds the GC contract, who approves the schedule of values, and whether change orders require landlord sign-off. The same allowance produces very different delivered space under each shape.

Amortization

Whether the allowance converts to rent over the term — and how.

A "free" allowance is paid as a build-out credit; an amortized allowance is paid by the landlord and added back to base rent over the term (or a portion of it), usually at a stated interest rate. The math turns a $40/sqft allowance into rent the tenant effectively pays back over years 1–5.

Flag: Confirm whether the allowance is amortized, the interest rate, the amortization period, and the residual that reverts to the landlord at expiry. An amortized allowance has a real cost — surface it before signing.

Recapture clause

What the landlord takes back if the tenant leaves early.

A recapture clause lets the landlord recover unamortized TIA funds if the tenant terminates, assigns, or sublets before the amortization period ends. The recapture is usually a prorated dollar amount tied to months remaining, and it can erase much of the headline value of the allowance for a tenant expecting a short stay.

Flag: Confirm the recapture triggers (termination only, or also assignment / sublet), the formula (straight-line prorate or front-loaded), and any carve-outs (a sale of the business, an affiliate move).

Three checks worth running before the work letter is signed.

Cap figure, rentable basis, and unused-allowance treatment.

Push on the per-sqft number, confirm it multiplies against rentable (not usable) square feet, and decide what happens to unspent funds at completion — refund to tenant, credit against rent, or landlord retention. The unused-allowance clause is where the headline allowance quietly shrinks back to its true value.

Who controls the build-out and the schedule of values.

Decide whether the landlord's GC performs the work (cleaner delivery, slower change orders, scope risk on the landlord) or the tenant hires its own GC against a landlord-approved SOV (faster changes, scope risk on the tenant). The hybrid shape — tenant GC, landlord-approved SOV — is the most common but the most time-consuming to negotiate.

Amortization terms and recapture carve-outs.

If the allowance is amortized, confirm rate and period, and check the recapture triggers and carve-outs end-to-end. A short amortization plus aggressive recapture erases the headline value of the allowance for any tenant who exits before the term ends — surface this before relying on the number in an underwriting model.

Each value is bound to the page and section reference in the source lease — auditors verify it in one click. The per-lease schedule lives in alert preferences; plans and integrations live on the pricing page.

When you're ready to send the first PDF.

The early-access cohort opens through the intake page, or send an anonymised lease and Holdmark will return the records side by side. Holdmark surfaces TIA terms as an explicit field in the extracted abstract, bound to the page and section reference in the source PDF, so the audit trail reads as a verification step rather than a guess. For a sense of how the structured record reads end-to-end, the pricing page includes a sample extraction from a 30-page office lease.