Work letters and lease exhibits, explained

The exhibit that runs your buildout

Somewhere behind the signature pages of your commercial lease sits an exhibit, often called the work letter, that will govern your buildout more than any other document you sign. It decides who builds what, what condition the space arrives in, whose money pays for which piece, and who can veto your design. First, the disclaimer that matters: we are a construction company, not a law firm. This post is education; your attorney and broker negotiate your lease. What we bring is the construction reading, the part where words turn into dollars.

Landlord's work vs tenant's work

The work letter splits the project into two buckets. Landlord's work is what the landlord builds at their cost, typically bringing the space to a defined baseline: demising walls, utility stubs, maybe HVAC and restrooms. Tenant's work is everything that makes the space yours, from layout walls to finishes to your equipment infrastructure. Every dollar of your budget depends on where that line is drawn, because anything left out of landlord's work is quietly moved into yours.

Delivery condition: where the money hides

The work letter names a delivery condition: grey shell, warm shell, vanilla shell, white box, or sometimes just "as-is." Here is the problem we see constantly: those labels have no single fixed meaning. One building's vanilla shell includes an ADA restroom, ceiling and lighting; another's means drywall and a concrete floor. The construction-finance glossary from Billd and others document the general categories, and our shell conditions guide walks through them, but the only definition that counts is the itemized list in your exhibit. If the exhibit says a label without a list, ask for the list. When we do a pre-lease walkthrough, we price the gap between the promised delivery condition and what your business actually needs, which converts the label into a number before you have signed anything.

The allowance mechanics

If your deal includes a tenant improvement allowance, the work letter is where its machinery lives: the per-square-foot amount, what costs are eligible, the draw procedure with its invoices and lien waivers, the deadline to use it, and what happens to unspent money. The structures and current market numbers are covered in our TI allowance post and the full allowance guide. Two construction-side details worth catching: whether the allowance can pay for drawings and permits, not just construction, and whether the landlord charges a supervision or administration fee against it, which effectively shrinks the number on the page.

Approval rights and long-lead reality

Work letters give the landlord approval over your plans and often over your contractor. Reasonable in principle; in practice, the schedule has to account for each approval round. The exhibit may also set rules that shape construction: work hours, elevator access, where dumpsters live, required insurance limits, and restoration obligations when the lease ends, meaning what you must tear out someday. Each of those is a line in a good estimate. On multi-tenant projects like our 8th Street West buildouts, those building rules were part of the schedule from day one, which is why the building stayed open the whole time.

Dates with teeth

Finally, the exhibit connects construction to the lease's economics: when rent starts, whether delivery delays push it, and whether your opening obligations have penalties. A rent commencement tied to "substantial completion of landlord's work" means someone has to define substantial completion; a fixed opening date in a retail lease means your buildout schedule is a contract term, not a hope. Bring the construction exhibits to your contractor before signature. Reading them is free, and it is the cheapest insurance in commercial real estate.