The work letter is a written statement that is signed by both the landlord and the tenant detailing the issues related to the fit-out of a tenant’s space. It will define the building’s standards and break down details such as the number of light fixtures, doors, the size of partitions and all other interior elements that the landlord will install for a tenant. The work letter may come as a separate letter or it is sometimes an exhibit to the lease. Typically, the lease is signed before all items on the work letter are negotiated and agreed to.
As we discussed in last week’s blog post (T.I. Allowance vs Turnkey), the cost of the interior fit-out is shared between the landlord and the tenant, in some way. A real estate project manager can be an invaluable resource when it comes to the work letter. Even if a company has a real estate or facilities team, the interior fit-out construction costs and timeline can be extremely difficult to budget or schedule, without significant market knowledge.
Tenants lose negotiating power when the work letter is approached prior to signing a lease, so typically the work letter is not addressed until after the lease is signed. This means that companies are often in the dark regarding the actual condition of the space they are getting and what it will cost to fit it out. With the help of a project manager, you can predict potential problems and negotiate provisions to cover them. A project manager will have real time data and pricing and will be able to put together a realistic budget so that the work letter can be negotiated with the tenant’s best interest at the forefront.