Who pays for the architect in a commercial lease tenant improvement?

Architect fees in commercial lease tenant improvements are typically paid from the TI allowance — but this varies. In landlord-managed TI work, the landlord's architect costs are often included in 'soft costs' paid from the TI allowance. In tenant-managed work, the tenant contracts directly with an architect and the fees are eligible for TI allowance reimbursement along with other hard and soft costs. Tenants should confirm: (1) whether architect fees are eligible costs under the TI allowance definition; (2) whether there's a cap on soft costs (architect, engineering, permits) as a percentage of the TI allowance; (3) who owns the plans and drawings after construction.

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Tenant Improvements Legal Provisions ⏱ 15 min read

Commercial Lease Architect & Construction Manager Rights: The Complete Tenant Guide

Q: Can a tenant use their own architect in a commercial lease build-out?

In most commercial leases where the tenant is managing their own tenant improvement (TI) work, the tenant has the right to select their own architect — subject to landlord approval, which is typically conditioned on the architect being licensed, carrying required insurance, and meeting competency standards. Landlord's approval should not be unreasonably withheld. In landlord-managed TI work, the landlord typically selects their preferred architect, though tenants often have the right to provide design input and approve final plans.

Q: How can a tenant protect themselves from landlord CM fee overcharges?

Landlord construction management fees are frequently abusive. Tenants should: (1) Negotiate a fixed cap on CM fees (e.g., 'not to exceed 3% of hard costs'); (2) Require that CM fees not be deducted from the TI allowance unless specifically agreed; (3) Request itemized billing for all CM fee components; (4) Negotiate the right to substitute a tenant's own CM for landlord's CM at tenant's cost; (5) Insist that CM fees be excluded from any construction costs used to calculate TI overage obligations; (6) Include audit rights for all CM fee invoices.

Who controls your build-out — you or your landlord? The architect approval process and construction management rights embedded in your work letter can cost or save you hundreds of thousands of dollars. Here's how to negotiate them correctly.

Why Architect and CM Rights Matter More Than Most Tenants Realize

When tenants negotiate a commercial lease, they focus heavily on base rent, TI allowance, and term length. The work letter — the exhibit governing the build-out construction process — often gets far less attention. That's a mistake.

The work letter determines:

Who selects the architect — and what happens when the landlord doesn't approve your choice
Who manages construction — and how much the landlord charges for that management
Who owns the plans — critical if you want to use your existing design at a future location or for a future lease renewal
How long approvals take — slow approval processes directly delay your opening date and burn your free rent
What happens when construction goes over budget — and whether cost overruns come out of your pocket or your TI allowance

For a 5,000 SF retail tenant with a $150/SF TI allowance ($750,000 total), construction management and architect rights aren't abstract legal concepts — they're direct determinants of whether you control $750,000 in spending or whether your landlord does.

⚠ The Hidden Risk: Landlord-Controlled Construction

Many commercial leases — particularly in retail, healthcare, and multi-tenant office — give the landlord control over construction management, even when the TI allowance is nominally the tenant's money. This means the landlord's preferred contractors build your space, at potentially above-market rates, with the cost overruns coming out of your TI or your own pocket.

The Two Models: Landlord-Managed vs. Tenant-Managed TI Work

Model 1: Landlord-Managed TI Construction ("Landlord's Work")

In landlord-managed construction, the landlord selects the architect, hires the general contractor, manages construction, and delivers the finished space to the tenant. The tenant's TI allowance is applied toward the construction costs. This model is common in:

Multi-tenant office buildings with standardized build-outs
Large retail centers where the landlord requires consistent build quality
Healthcare MOBs (medical office buildings) with complex MEP requirements
Industrial buildings where base building work and TI work are intertwined

Tenant advantages: Landlord handles complexity; tenant doesn't need to manage a construction project; landlord warranties the work.

Tenant risks: Loss of control over costs; landlord's contractors may not be optimal; construction management fees reduce the effective TI; design may not fully reflect tenant's brand or operational needs; tenant is at landlord's scheduling mercy.

Model 2: Tenant-Managed TI Construction ("Tenant's Work")

In tenant-managed construction, the tenant selects the architect (subject to landlord approval), hires the general contractor (subject to landlord approval), manages the build-out, and submits draw requests against the TI allowance for reimbursement. This model is common in:

Restaurant and food service leases where kitchen design is proprietary
Branded retail concepts with strict design standards
Specialty healthcare (dental, veterinary, urgent care) with specialized equipment
Tech office tenants with unique space programming needs

Tenant advantages: Full control over design, contractor selection, and cost management; can select best-in-class contractors; construction timeline is tenant-controlled.

Tenant risks: Tenant manages construction complexity; delays in landlord approvals can cascade; tenant is responsible for construction overruns; landlord approval process can be slow.

Architect Selection and Approval Rights

The Standard Approval Process

In most commercial leases where the tenant manages their own TI work, the tenant has the right to select their own architect — subject to landlord's reasonable approval. The lease should specify:

Approval timeline: How many days does the landlord have to approve or reject the tenant's architect selection? (Typically 5–10 business days)
Approval standards: On what grounds can the landlord reject an architect? (Must be specific: licensing, insurance, prior experience with commercial build-outs)
Deemed approval: What happens if the landlord fails to respond within the approval period? (Should be "deemed approved")
Rejection remedies: If the landlord rejects the tenant's architect, what's the process to nominate a replacement and get approval?

Architect Qualifications Landlords Typically Require

Requirement	Typical Standard	Negotiation Note
Licensure	Licensed architect in the state where the property is located	Reasonable; non-negotiable in most cases
Professional liability insurance	$1M–$2M per occurrence E&O insurance	Confirm your architect can meet this; negotiate ceiling if needed
General liability insurance	$2M–$5M per occurrence	Standard; ensure architect can comply
Commercial experience	Prior experience with commercial TI projects of similar type/size	Push back on overly restrictive experience requirements that would exclude your preferred architect
No prior claims/disputes with landlord	Some landlords add this	Negotiate to remove — this is an improper basis for rejection
Use of landlord's "approved" drawings format	AutoCAD or Revit in specified format	Reasonable; confirm your architect uses standard formats

🚫 Red Flag: "Landlord's Approval in Landlord's Sole Discretion"

Any provision giving the landlord absolute ("sole") discretion to approve or reject your architect, contractor, or plans is a red flag. Negotiate to change "sole discretion" or "sole and absolute discretion" to "reasonable approval, not to be unreasonably withheld, conditioned, or delayed." This single change can prevent endless approval delays and arbitrary rejections.

Construction Manager Rights and Fees

What Construction Managers Do in a Lease Context

In commercial lease construction, the construction manager (CM) or project manager (PM) oversees the build-out process — coordinating the general contractor, managing the construction schedule, administering the budget, reviewing change orders, and ensuring the work is completed on time and to specification. The CM serves as the owner's (either tenant's or landlord's) representative in the field.

The Construction Management Fee Problem

Many commercial leases require tenants to pay a landlord "construction management fee" — typically 3%–15% of total TI construction costs — even in tenant-managed construction where the landlord is doing essentially nothing. This fee is one of the most frequently negotiated and disputed provisions in commercial lease work letters.

💰 Construction Management Fee Impact on TI Allowance

Total TI allowance$750,000

Total construction cost$750,000

Landlord CM fee (10%)$75,000

Effective TI available for construction$675,000

Landlord CM fee (3% — negotiated down)$22,500

Effective TI available with negotiated fee$727,500

Savings from negotiating CM fee$52,500

Negotiating the Construction Management Fee

Here are the key negotiation strategies for CM fees:

1. Eliminate It Entirely (Best Case)

In strong tenant markets or for significant TI commitments, argue that since the tenant is managing their own construction, there's no basis for a CM fee. Frame it as: "We're managing the entire process; your team's involvement is limited to two plan review sessions and a final walk-through. A management fee is not appropriate here."

2. Cap It at 3%

If you can't eliminate it, push for a hard cap of 3% of hard costs only (not soft costs, FF&E, or permits). This is a significant reduction from the 8%–15% some landlords initially propose.

3. Exclude It from TI Allowance Calculation

Negotiate that the CM fee is charged separately and not deducted from the TI allowance. If the allowance is $750,000 and the CM fee is $22,500, you want $750,000 for construction plus the CM fee obligation — not $727,500 for construction plus $22,500 CM fee coming from the same $750,000 bucket.

4. Credit Against Fee If Tenant Provides Own CM

If the tenant hires a qualified third-party construction manager or owner's representative, argue for a full offset or credit against the landlord's CM fee. Your PM is providing all the value; the landlord's fee is duplicative.

Plan Approval Process and Timelines

Slow plan approval is one of the most common causes of lease commencement delays. The design and approval process for a commercial TI build-out typically has three stages:

Stage	What's Submitted	Landlord Review Period	Negotiation Goal
Schematic Design (SD)	Preliminary floor plan, space programming, major design concepts	5–10 business days	Establish "deemed approved" if no response in 10 business days
Design Development (DD)	Detailed design drawings, MEP coordination, structural requirements	10–15 business days	Reject only for specific, stated reasons; no aesthetic objections
Construction Documents (CDs)	Permit-ready drawings, specifications, bid documents	10–15 business days	Approval required before permit submission; deemed approved if no response

The "Deemed Approved" Provision

One of the most important protections a tenant can negotiate is a deemed-approval provision: if the landlord fails to approve or reject submitted plans within the specified review period, the plans are automatically deemed approved. Without this provision, a landlord can effectively stall construction indefinitely by simply not responding — consuming your free rent period while delaying your opening.

Model language for a deemed-approval provision:

"Landlord shall approve or reject the Tenant's Plans within ten (10) Business Days after receipt. Any rejection shall specify in reasonable detail the reasons for rejection and the revisions required. If Landlord fails to approve or reject the Tenant's Plans within such ten (10) Business Day period, the Tenant's Plans shall be deemed approved. Landlord's approval shall not be unreasonably withheld, conditioned, or delayed, and shall be limited to structural, base-building systems, and code compliance matters."

Contractor Selection and Approval

Approved Contractor Lists

Many landlords maintain "approved contractor" lists — rosters of general contractors and subcontractors pre-approved to work in the building. The ostensible reason is quality control and familiarity with base building systems; the practical reality is that approved contractors often have relationships with the landlord and may charge above-market rates knowing they face limited competition.

Tenants should:

Request the approved contractor list early in negotiations and obtain independent bids from approved contractors to benchmark pricing
Negotiate the right to add contractors to the approved list (with reasonable qualification requirements)
Push for a provision allowing tenants to use non-listed contractors subject to landlord's reasonable approval (with deemed approval after 5 business days)
For specialized subcontractors (kitchen equipment installation, specialty electrical, healthcare-specific trades), negotiate specific carve-outs from the approved list requirement

Bonding and Insurance Requirements

Landlords typically require general contractors to carry payment and performance bonds (typically 100% of the contract value) plus significant insurance coverage. These requirements are generally reasonable, but tenants should verify that the cost of bonds and required insurance is included in the construction budget for TI allowance purposes — and not treated as an "ineligible cost."

Ownership of Plans and Drawings

Who owns the architect's drawings after construction is completed? This question matters more than most tenants realize:

Lease renewal: If you want to expand, reconfigure, or refresh your space at renewal, having ownership of the existing drawings saves significant architect fees for documentation work
New location roll-outs: For multi-location tenants, the prototype design represents significant intellectual property — you don't want a landlord claiming ownership of your store design
Insurance and casualty: If there's a fire or flood, existing as-built drawings are essential for reconstruction — who owns them determines how quickly you can rebuild
Dispute resolution: If there's a dispute about whether tenant improvements were properly constructed per approved plans, who controls the plans determines who controls the evidence

The general rule: the tenant should own the design concept and space programming; the landlord may be entitled to the as-built drawings for building record purposes. Negotiate for: "(i) Tenant shall own all architectural plans, design drawings, and specifications for the Tenant's Work; (ii) Tenant shall provide Landlord with a complete set of as-built drawings within 60 days after construction completion; (iii) Landlord's copy is for building record purposes only and may not be used for other tenant spaces without Tenant's written consent."

Change Order Rights and Approvals

During construction, changes from the approved plans — change orders — are inevitable. The change order approval process is a common source of disputes and delays:

Change Order Approval Timelines

Negotiate specific timelines for change order approvals. A change order review period of "within 5 business days" is reasonable; "within a reasonable time" is an invitation to delay. Include a deemed-approval provision for change orders just as you would for design plans.

Material vs. Non-Material Changes

Not all changes require full landlord approval. Negotiate a bifurcated system: (1) "Material changes" (structural modifications, changes to base building systems, exterior changes) require full landlord approval; (2) "Non-material changes" (interior layout adjustments, finish substitutions, minor MEP adjustments that don't affect base building) only require notice to landlord — not approval. This dramatically reduces approval bottlenecks.

Change Order Cost Documentation

If change orders result in costs above the TI allowance, clearly document who approved each change order. If the landlord or their CM requested a change (to comply with base building requirements, code interpretations, or building standard finishes), the cost should be the landlord's responsibility — not charged against the tenant's TI allowance.

📊 TI Budget with Full Cost Breakdown: 4,000 SF Restaurant Build-Out

Hard costs (construction, GC work)$520,000

Kitchen equipment (FF&E — often TI-eligible)$195,000

Architect and MEP engineering fees$45,000

Permits, inspections, approvals$12,000

Contractor insurance and bonds$18,000

Landlord CM fee (5% hard costs)$26,000

10% contingency$81,600

Total project cost$897,600

TI allowance ($175/SF × 4,000 SF)$700,000

Tenant out-of-pocket above TI$197,600

Punch List and Construction Completion

The final stage of TI construction is the punch list process — a walk-through inspection that identifies incomplete or defective items that need correction before the space is formally "substantially complete." Architect and CM rights are critically important here:

Substantial Completion Standard

Most leases base rent commencement on "substantial completion" of the TI work — typically defined as the point when the space can be used for its intended purpose despite minor remaining punch list items. Negotiate a clear definition: "Substantially Complete means the Tenant's Work has been completed in accordance with the approved plans in all material respects, a certificate of occupancy (or its equivalent) has been issued, and the only remaining items are minor items that do not materially interfere with Tenant's use of the Premises."

Punch List Completion Deadline

A punch list without a completion deadline is a punch list that never gets done. Negotiate: "All items on the punch list shall be completed within thirty (30) days after the date of Substantial Completion, or as soon thereafter as reasonably practicable but not later than sixty (60) days after Substantial Completion."

Tenant's Architect Certification

For landlord-managed TI work, negotiate the right to have your architect — not the landlord's — certify substantial completion. The landlord's architect has an obvious incentive to certify completion prematurely (triggering rent commencement). Your architect's independent certification ensures the space truly meets the approved specifications before your rent clock starts.

✅ Architect & CM Rights Checklist for Commercial Tenants (12 Items)

Confirm whether TI work is landlord-managed or tenant-managed — and negotiate to be tenant-managed if TI exceeds $100,000
Negotiate the right to select your own architect subject to reasonable approval criteria (not sole landlord discretion)
Establish a specific architect approval timeline (5–10 business days) with deemed-approval if no response
Limit architect rejection grounds to objective criteria: licensure, insurance, technical competence — not aesthetic preference
Negotiate plan approval timelines for each design stage with deemed-approval provisions
Cap or eliminate the landlord construction management fee; if retained, exclude it from TI allowance deductions
Negotiate the right to use contractors outside approved lists (subject to reasonable qualification review)
Establish a bifurcated change order system: full approval for material changes; notice-only for non-material changes
Confirm that architect fees and soft costs are eligible costs under the TI allowance definition
Negotiate ownership of architectural plans and drawings — tenant owns the design; landlord gets as-built copies for record
Define substantial completion clearly and include your architect's right to certify it independently
Include a punch list completion deadline (30–60 days post-substantial completion) with remedies for landlord failure to complete

Special Considerations by Tenant Type

Restaurant and Food Service

Kitchen design is among the most complex — and proprietary — of any commercial build-out. Restaurant tenants should insist on tenant-managed construction with full control over the kitchen design and MEP coordination. The exhaust, grease trap, gas lines, electrical service, and ventilation systems are interconnected in ways that require your kitchen designer (not a generic architect) to lead. Negotiate: "Tenant's kitchen consultant and specialized kitchen equipment contractor shall be approved without condition upon provision of license and insurance evidence."

Healthcare and Medical Office

Medical build-outs involve specialized electrical systems (isolated power for imaging equipment), plumbing (procedure rooms, sterilization), HVAC (positive/negative pressure), and ADA/FHA compliance for healthcare facilities. Healthcare tenants should use healthcare-specialist architects and insist on tenant-managed construction. The landlord's standard commercial architect is rarely qualified to design a proper procedure suite or imaging room.

Tech Office and R&D

Technology tenants often have specialized power density requirements, data center rooms, server cooling, and custom collaboration space programming. Negotiate the right to install above-standard electrical capacity (at tenant's cost) with clear protocols for future tenant surrender of electrical infrastructure.

Connecting Architect Rights to TI Allowance Protection

Architect and CM rights are inseparable from TI allowance protection. For a comprehensive understanding of how TI allowances are disbursed, disputed, and protected, see our guides on TI allowance disbursement, TI reimbursement disputes, and the landlord work letter.

Use LeaseAI's Lease Abstract Tool to organize and review your work letter provisions alongside all other key lease terms.

Frequently Asked Questions

Can a tenant use their own architect in a commercial lease build-out?

In most commercial leases where the tenant manages their own TI work, the tenant has the right to select their own architect — subject to landlord approval, which is typically conditioned on the architect being licensed, carrying required insurance, and meeting competency standards. Landlord's approval should not be unreasonably withheld. In landlord-managed TI work, the landlord typically selects their preferred architect, though tenants often have the right to provide design input and approve final plans.

What is a construction manager (CM) in a commercial lease context?

A construction manager (CM) in a commercial lease build-out oversees the construction process on behalf of either the tenant or landlord — coordinating general contractors, subcontractors, scheduling, quality control, and budget management. Many landlords charge a "construction management fee" of 3%–10% of TI costs even when the tenant manages their own work — this fee is frequently negotiable and often elimnable.

What is a work letter in a commercial lease?

A work letter (also called a tenant improvement exhibit or construction exhibit) is an exhibit to the commercial lease that governs all aspects of the tenant improvement construction process. It specifies: who selects and approves the architect; who manages construction; the TI allowance amount and disbursement process; design submission and approval timelines; building standard specifications; insurance and bonding requirements for contractors; and the basis for determining the rent commencement date.

How can a tenant protect against landlord CM fee overcharges?

Tenants should: (1) Negotiate a fixed cap on CM fees (e.g., "not to exceed 3% of hard costs"); (2) Require that CM fees not be deducted from the TI allowance unless specifically agreed; (3) Request itemized billing for all CM fee components; (4) Negotiate the right to substitute a tenant's own CM for landlord's CM at tenant's cost; (5) Insist that CM fees be excluded from any construction costs used to calculate TI overage obligations; (6) Include audit rights for all CM fee invoices.

What happens when a tenant's architect plans are rejected by the landlord?

When a landlord rejects tenant's architect plans, the lease should require the landlord to provide specific written reasons for rejection within a defined window (10–15 business days). Tenants should ensure the lease specifies: (1) a reasonable review period with deemed approval if landlord fails to respond; (2) that rejections must be specific and in writing; (3) that grounds for rejection are limited to conflicts with base building systems, structural issues, or code violations — not aesthetic preferences.

Who pays for the architect in a commercial lease TI build-out?

Architect fees in commercial lease tenant improvements are typically paid from the TI allowance. Tenants should confirm: (1) whether architect fees are eligible costs under the TI allowance definition; (2) whether there's a cap on soft costs (architect, engineering, permits) as a percentage of the TI allowance; (3) who owns the plans and drawings after construction. Generally, soft cost caps of 15%–20% of the TI allowance are reasonable for design and permit costs combined.

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