What is it?
A tenant improvement allowance (TI) is money the landlord gives toward the cost of fitting out the tenant’s space. BDC (the Business Development Bank of Canada) explains it is usually a set amount per square foot of rented space.
The perks a landlord offers to attract a tenant are together called tenant inducements. Examples are free-rent months, when no rent is charged, or help paying for build-out.
Why does it matter for value?
- The cost of filling an empty building, or one whose leases end soon, includes TI, free rent and leasing commissions.
- If this cost is large, you subtract it from the “value once fully leased” to get today’s value.
- When many spaces are empty, tenants can ask for bigger perks, so the cost rises. (A general principle, not a rule.)
What to watch out for
Check whether TI and free rent have already been promised in a lease. If you buy the building, the new owner may take over that promise. Check the tax and accounting treatment separately.
What the law and official sources say
Quotes are copied word for word. The "In plain words" lines are our explanation, not an official translation.
A cash amount offered by a landlord to help you pay for renovations to a leased space. The allowance is usually a certain amount of money per square foot of rented space. It is sometimes offered as a tenant inducement.In plain wordsTI is money the landlord gives toward the tenant’s renovation, usually a set amount per square foot of rented space. This is written from the tenant’s point of view.
Source: bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/13-terms-you-need-to-understand-before-signing-your-commercial-real-estate-lease · checked Nov 2, 2026
Incentives offered by a landlord to encourage you to rent a space. Examples include several months rent free or help with paying for leasehold improvements.In plain wordsInducements are what the landlord offers to attract a tenant, such as several months rent free or help with build-out.
Source: bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/13-terms-you-need-to-understand-before-signing-your-commercial-real-estate-lease · checked Nov 2, 2026
Common questions
Does the tenant have to pay the TI back?
It differs by lease. Some leases require part to be repaid if the lease ends within a set period. Check the wording.
Does the landlord still pay costs during free-rent months?
Yes. Even with no rent, property tax, insurance and upkeep continue. So when you buy a building, check how many free-rent months remain.
Guides that use this term
Sources checked
- BDC, 13 terms to understand before signing a commercial lease · checked Nov 2, 2026