Lawyers explain work letters from the lease side. Here is the builder’s side: what in a work letter actually drives cost overruns and delays, and why rent can start before your space is ready.
Most articles about work letters are written by lawyers, and they cover the legal language well. This one is written from the job site. The work letter and the TI allowance decide who builds your space, who pays when the budget runs over, and when your rent starts. Those three questions are where most tenant improvement problems begin.
The work letter and the allowance are different things
The work letter is the part of the lease that describes the construction: who hires the contractor, who approves the drawings, what the landlord delivers, and what counts as finished. The TI allowance is the money the landlord contributes toward that work, usually a dollar amount per square foot.
You can have a generous allowance and a work letter that still leaves you exposed, and the other way around.
Three common setups
- Turnkey. The landlord builds the space to an agreed plan and delivers it finished. Simple for the tenant, but you have less control over the contractor, the schedule, and the quality.
- Allowance, landlord builds. The landlord manages construction and charges anything above the allowance to you. Watch for management fees and change order markups.
- Allowance, tenant builds. You hire the contractor and the landlord reimburses up to the allowance. You control the schedule and quality, and you carry the risk of overruns.
What actually causes overruns
From the contractor's side, overruns rarely come from one big surprise. They come from:
- Drawings that are not complete when pricing happens, so the bid misses scope that shows up later
- Base building work assumed to be the landlord's but not written into the work letter, such as restrooms, sprinkler mains, or electrical capacity
- Long-lead items ordered late, which push the finish date
- Building rules discovered after the bid, such as after-hours requirements or union labor
Why rent can start before you move in
Rent commencement is often tied to substantial completion, the point where the space can be used for its purpose, or to a fixed date. If the work letter defines delays carefully, the landlord's delays push the date out and the tenant's delays do not. If it does not, a late permit or a late door shipment can mean paying rent on a space you cannot use yet.
Questions to settle before signing
- Who decides when the space is substantially complete, and how is it documented?
- What base building conditions does the landlord guarantee?
- Can unused allowance go toward cabling, furniture, or rent?
- What happens to the schedule if the landlord's approval of drawings is late?
- Who pays for code upgrades triggered by your work?
Where a builder helps
A walkthrough and a line-item estimate before the lease is signed turns these questions into numbers. Your broker can negotiate the allowance and the delivery conditions with real costs behind them. If you are comparing spaces, see how we approach tenant improvements.
About Field Notes
Field Notes is published by 32 Build, a licensed, bonded & insured Chicago general contractor working in residential renovation, gut rehabs, multifamily repositioning, and commercial construction. Every article is written or reviewed by our field team based on actual project experience — not national averages or general advice.
If you have a project in mind after reading, we offer free on-site estimates for all project types across Chicago and the suburbs. Our team responds the same day.
