Guide · updated September 2026
Reading a commercial work letter: who pays for what
The work letter is the schedule in a commercial lease that defines what the landlord delivers and what the tenant builds. It decides more of a tenant improvement budget than any trade rate or contractor margin, because it sets the starting condition of the space. It is also the only part of that budget that is still negotiable — once the lease is signed, the division of work is fixed.
What a work letter contains
Work letters vary in length from a paragraph to twenty pages, but they all answer the same questions: what condition the space will be in when you receive it, what the landlord will build, what you must build, what contribution the landlord will make, and what rules apply while you build.
| Provision | What to look for |
|---|---|
| Delivery condition | Cold shell, grey shell, or existing fit-out — and whether demolition of existing work is yours |
| Landlord's work | The specific scope, and the date it will be complete |
| Tenant's work | Everything not listed as landlord's work, including items you may assume are base building |
| Allowance | Amount, what it may be spent on, and when it is paid |
| Fixturing period | How long, and whether it starts on possession or on completion of landlord's work |
| Base building provisions | Electrical capacity, mechanical provision, sprinkler coverage, washroom availability |
| Construction rules | Approved contractors, hours, insurance limits, deposits, landlord review fees |
| Restoration | Whether you must remove your improvements at the end of the term |
The provisions that move the budget most
Mechanical provision. A shell delivered with a main trunk only, versus one delivered with distribution to the space, is a large difference that a per-square-foot benchmark will not capture.
Electrical capacity. The work letter states what is provided at the panel. If your use needs more, the upgrade is yours, it may involve the utility, and it is rarely quick.
Sprinkler coverage. Whether the space is sprinklered, and whether heads must be relocated to suit your layout, is a routine cost that is routinely forgotten.
Washrooms. Whether they are within the premises or in a common area, and whether they meet current accessibility requirements, can add or remove a substantial scope.
Restoration obligations. An obligation to return the space to base building at the end of the term is a real future liability. It belongs in the decision, not in a drawer.
Fixturing periods
A fixturing period is rent-free time to build. Two details decide whether it is adequate.
First, when it starts. A period starting on possession rather than on completion of the landlord's work transfers the landlord's delay risk to you. Second, whether it is long enough for permits. Municipal review in Metro Vancouver can consume a large share of a short fixturing period before a single trade is on site — so the period should be assessed against a real permit timeline, not an optimistic one.
When to have it reviewed
Before the offer to lease is finalised. At that point the division of work, the allowance and the fixturing period are all still open. Afterwards you are managing a fixed position rather than improving it.
A construction review of a work letter takes a few hours and regularly identifies obligations worth tens of thousands of dollars. It is the highest-return hour in a tenant improvement project, and it happens before anyone has been engaged to build anything.
Related guides
- What does a tenant improvement cost per square foot in Metro Vancouver?
- What is a tenant improvement allowance, and what is typical in Metro Vancouver?
- Do you need a licensed contractor for commercial work in BC?
Last reviewed September 2026. Construction costs and allowances move; check the sources before relying on a figure in a lease negotiation.
Common questions
What is a work letter in a commercial lease?
It is the schedule that defines what the landlord delivers and what the tenant builds, along with any allowance, the fixturing period and the rules that apply during construction. It is usually an exhibit to the lease rather than part of the main body.
What is the difference between a cold shell and a grey shell?
A cold shell is essentially a bare structure — no interior finishes, often no distributed mechanical or electrical, sometimes no washrooms. A grey shell typically includes basics such as a demised, drywalled envelope, a base mechanical provision and an electrical panel. The terms are not standardised, so what matters is the specific list in the work letter rather than the label.
Can a work letter be negotiated?
Yes, and it is often more productive than negotiating rent. The division of work, the allowance amount and structure, the fixturing period and the restoration obligation are all commonly negotiated — but only before the lease is signed.
Who pays to remove tenant improvements at the end of a lease?
Whoever the work letter and lease say. Restoration obligations vary widely: some leases require full return to base building, some require removal of specific items, and some require nothing. It is worth establishing at signing, because it is a real cost at the end of the term.