A landlord work letter is the part of a commercial lease that says who builds what before a tenant opens: the work the landlord does to the base building (landlord's work), the work the tenant does to fit out the space (tenant's work), who pays, who approves the drawings and who hires the contractor. In Vancouver it also decides who signs the City's permit undertaking and who carries lien and site-safety risk. Read it with your contractor before you sign the lease, because every gap in it becomes a cost or a delay later.

This guide is for tenants, landlords and property managers planning a tenant improvement in Vancouver and Metro Vancouver.

TL;DR

  • A work letter is usually an exhibit to the lease that splits the job into landlord's work and tenant's work.
  • Labels like "warm shell" or "base building" aren't enough. Get a line-by-line list of what will be in place on delivery day.
  • In Vancouver, when a tenant carries out the project, the City's undertaking letter (Schedule E-2) is signed by both the owner and the tenant before the permit is issued.
  • Name the prime contractor in writing, settle who orders the hazardous materials survey, and check whether the landlord has filed a lien notice of interest.

What is a landlord work letter in a commercial lease?

A work letter is the construction agreement inside a lease. It describes the condition of the space and the work needed to make it usable. It typically covers:

  • Landlord's work. Items the landlord completes, often to the base building or the demising walls, before or during the tenant's fit-out.
  • Tenant's work. The tenant's own fit-out: partitions, finishes, millwork, lighting layout, and anything specific to the business.
  • The allowance. Any tenant improvement allowance the landlord pays toward tenant's work, and when and how it is paid. See our guide to negotiating a tenant improvement allowance.
  • Approvals. How the landlord reviews the tenant's drawings and which base-building systems need its consent.
  • Contractor rules and delivery. Whether the tenant can choose its own contractor, required insurance, building rules, and what "delivered" means.

What is the difference between landlord's work and tenant's work?

Landlord's work is usually the part of the job that serves the building or makes the space leasable. Tenant's work is usually the part that serves one business. The line between them is a negotiation, not a standard, and it moves with the condition of the space. For how shell conditions differ, see warm shell vs cold shell.

The common trouble spots are the systems that cross the line: the electrical service and panel capacity, the sprinkler layout, washrooms, demising walls, the storefront, and the ceiling grid. If the work letter says only "landlord to deliver base building," write down exactly what that includes. A good test is to ask: if this item is missing on delivery day, whose cost is it to add?

What should a tenant check before signing the work letter?

  1. A delivery-condition list. Each item that will be in place on delivery, described in plain words, not just a label.
  2. Existing drawings. Base-building and previous tenant drawings.
  3. Who applies for permits. Whether the landlord or the tenant applies, and who signs the City's undertaking letter.
  4. Landlord approval steps. How the landlord reviews drawings and what standards it uses.
  5. Hazardous materials. Whether a survey exists, and who pays for any removal.
  6. Prime contractor. Who will be named prime contractor if the landlord's and tenant's trades overlap.
  7. Building rules. Working hours, loading, elevators and any landlord-required trades.
  8. Make-good. What must be removed or restored at lease end.

Have a lawyer review the lease. A contractor's role is to test whether the work letter is complete enough to price and build.

How do City of Vancouver permits fit into a work letter?

Many tenant improvements need a City building permit. For office tenants in eligible buildings, the City's Tenant Improvement Program (TIPs) is a dedicated permit stream for minor interior renovations: no new development permit and an expedited field review. Commercial office buildings with a building permit applied for after January 31, 2007 are automatically on the TIPs list. Changes in major occupancy, floor area additions such as mezzanines, and fire alarm or sprinkler upgrades aren't eligible. Under TIPs, the building permit must be issued before trade permits or construction begin. For the full permit picture, see our tenant improvement permit guide.

Two City requirements tie directly to the work letter:

  • The undertaking letter. The City requires a signed undertaking letter before a building permit is issued. Schedule E-1 is the owner's undertaking; Schedule E-2, the Owner's and Tenant's Undertaking, is used when a tenant is carrying out the project and is signed by both. If the landlord is slow to sign, the permit waits, so the work letter should commit the landlord to sign promptly.
  • First fit-outs in new buildings. The City's checklist calls for a Building Permit Data Sheet for the first tenant improvement in a newly constructed shell space, and a Schedule CP-3 from the base building's Certified Professional for tenant improvements before base-building occupancy. If you are an early tenant in a new building, the work letter should say who obtains these.

Outside Vancouver, each Metro Vancouver municipality runs its own permit process and forms, so confirm the requirements with the city where the space is located.

Who carries lien and safety risk during the build-out?

Liens. Under section 3 of B.C.'s Builders Lien Act, an improvement done with the prior knowledge, but not at the request, of an owner is deemed to have been done at the owner's request. That deeming rule doesn't apply to improvements made after the owner has filed a notice of interest in the land title office. Many commercial landlords file one, which can limit liens against the landlord's interest for tenant's work it did not expressly request. Tenants and their contractors should check title before work starts, and the work letter should say how payments and holdbacks are handled.

Safety. WorkSafeBC says that where two or more employers work at the same time, a written agreement should identify a prime contractor, and if there is no written agreement the owner is considered the prime contractor. Landlord's and tenant's work often overlap, so name the prime contractor in writing. More detail is in our post on prime contractor responsibilities.

Hazardous materials. Section 20.112 of B.C.'s Occupational Health and Safety Regulation requires the owner and the employers responsible for the work to have a qualified person inspect for hazardous materials, such as asbestos and lead, before renovation begins. In older buildings, that survey can change the scope, so settle who orders it before the lease is signed. See avoiding asbestos abatement delays.

Our perspective

Multigroup Contracting is a commercial general contractor and fee-based construction manager working in Vancouver and across Metro Vancouver since 2016, from our office at 700-838 West Hastings Street. We are registered with WorkSafeBC and carry $5 million in liability insurance. We build tenant improvements for office, retail and hospitality tenants, landlords and property managers.

The work letters that cause the fewest surprises are the specific ones. Before a tenant signs, we can walk the space, review the work letter against what is actually there, and write a scope that marks each item as landlord's work or tenant's work, so the price you get matches the lease you sign. If you are still deciding how to contract the build, our guide to general contractor vs construction manager compares the two models.

Talk through your work letter

Planning a tenant improvement or reviewing a lease? Call 778-819-5933, email info@multigroup.ca, or send the work letter and any drawings through our contact page. Get a free quote

FAQ

Is a work letter the same as a tenant improvement allowance?

No. The allowance is the money the landlord contributes toward tenant's work. The work letter is the wider agreement that also sets out landlord's work, approvals, contractor rules and the delivery condition. The allowance terms are often written inside the work letter.

Who applies for the building permit for a tenant improvement in Vancouver?

Either party can, depending on the lease. The City needs an undertaking letter with the application. When a tenant is carrying out the project, Schedule E-2 is signed by both the owner and the tenant before the permit is issued.

Can a tenant use its own general contractor?

Usually, if the lease allows it. Many work letters require the landlord's approval of the contractor, proof of insurance, and the use of landlord-designated trades for systems such as the fire alarm or sprinklers.

What happens if landlord's work isn't finished on the delivery date?

That depends on the lease. A clear work letter says what counts as delivery, how unfinished landlord's work is listed and completed, and how that affects the tenant's fit-out and rent start. If it is silent, raise it before signing.

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