Tenant Installation Allowance (TIA) and Beneficial Occupation (BO) Explained
Category Leasing
Tenant Installation Allowance (TIA) and Beneficial Occupation (BO) are two common terms that come up during lease negotiations. What do they mean and how do they work?
Tenant Installation Allowance
Tenant Installation Allowance refers to an allowance afforded to the Tenant by the Landlord in order to fit out and modify a leased space to make it more suitable to the Tenant's specific needs. This allowance is typically used for carpets, tiles, partitioning, electrical/IT work and painting.
Beneficial Occupation Period
The Beneficial Occupation Period refers to the period during which the Tenant is granted access to their leased premises in order to complete their Tenant Installation or fit-out. In this context, it's generally a rent-free period provided by the Landlord in order to give the Tenant time to fit out and prepare the premises before fully moving in and commencing their operations. It can be granted in lieu of, or in conjunction with, the TI.
How It Works
The value of the TI and length of BO Period is usually dependent on the amount of work that is required, as well as the monthly rental amount, strength of the Tenant and the length of the lease term. The longer the lease and the higher the rent, the greater the value the TIA/BO is likely to be.
The TI amount can be granted to the Tenant in various ways:
- The Tenant will get the required work approved by the Landlord and then pay the contractor once the work is completed. Thereafter the Tenant will invoice the Landlord for the TIA amount.
- The Tenant submits their requirements to the Landlord, who will then get the contractors or their in-house team to complete the work and settle the account directly.
- The TIA is provided in the form of a rent-free occupation period. The Tenant uses this "saved" rent money to pay contractors.
Although Landlords are not obligated to provide any sort of TIA/BO Period, most reputable Landlords, especially the larger corporate Landlords, are prepared to offer a TIA/BO Period for leases of 3 years or longer in order to attract Tenants and provide them with suitable premises to conduct their business. Typically, one might expect the TIA to be equivalent to one month's rent per year of lease.
Author: Richard Abrahams