Rework and additional spend from non‑compliant improvements
Definition
If tenant improvements do not comply with lease requirements or building standards, landlords can withhold TIA reimbursement until issues are corrected, forcing tenants to redo work at their own cost. Guidance stresses that non‑compliance with lease terms is a common mistake that leads to lost funds and delays.[1]
Key Findings
- Financial Impact: Rework on commercial interiors frequently runs in the tens of thousands per location; for a mid‑size TI project, needing to redo 10–15% of work can cost $20,000–$75,000 plus potential loss of TIA reimbursement tied to the non‑compliant work.[1][6]
- Frequency: Occasional but recurring across portfolios (whenever contractors ignore or misinterpret lease specifications)
- Root Cause: Inadequate alignment between lease provisions and construction scope, limited landlord oversight during build‑out, and weak documentation of approvals result in work being performed that does not meet reimbursable criteria and must be changed or is not reimbursed.[1][6]
Why This Matters
This pain point represents a significant opportunity for B2B solutions targeting Leasing Non-residential Real Estate.
Affected Stakeholders
Construction/project managers, Tenants’ design teams, Landlords’ property managers, General contractors and architects
Deep Analysis (Premium)
Financial Impact
$10,000–$50,000 per location from delayed/forfeited TIA reimbursements + Cash flow impact (payment delayed 30–90 days) + Staff time on follow-up (20–40 hours per incident) • $12,000–$50,000 per location from delayed TIA reimbursements + Cash flow disruption (payment delayed 30–90 days) + Labor cost (20–30 hours per incident) • $15,000–$60,000 per location (rework + reimbursement delay) + Cash flow impact (payment halted 30–60 days) + Staff burden (15–25 hours per rejected reimbursement)
Current Workarounds
Ad-hoc phone calls to health consultants, paper inspection reports, manual tracking of corrections in shared spreadsheets, post-inspection rework negotiations • Confluence or Notion docs with handwritten compliance status; Slack channels for approvals; PDF lease scans marked up manually; spreadsheets tracking budget vs. actual spend without compliance gates • Daily site inspections with paper notes or photos; contractor communication via site meetings and phone; manual comparison of actual work to approved plans; ad-hoc photo documentation of compliance issues
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Methodology & Sources
Data collected via OSINT from regulatory filings, industry audits, and verified case studies.
Related Business Risks
Forfeited tenant improvement allowance due to poor tracking
Uncollected or delayed TIA reimbursements from landlords
Budget overruns on tenant improvements from weak TIA expense tracking
Overpaying contractors due to inadequate invoice auditing
Delayed TIA reimbursements extending time-to-cash
Delayed openings and lost rent or sales from TI process bottlenecks
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