The short answer: In a landlord build, the landlord hires the contractor and manages the work, usually to plans you approve. In a tenant build, you hire your own licensed contractor and run the job, often with a landlord allowance and under the landlord’s rules. A landlord build puts less on your plate; a tenant build gives you more control over cost, quality, and schedule, but more of the risk lands on you. The right choice depends on how complex your space is, how much time you have, and what the work letter actually says.
“Don’t worry, we’ll take care of the build-out.”
It’s one of the most reassuring things a landlord can say. Sometimes it’s exactly the right deal. Other times, a tenant learns later that “taking care of it” meant the landlord’s contractor, budget, and schedule, plus a bill for every change the tenant asked for.
The other path has traps too. Hire your own contractor and you gain control, but you also pick up insurance requirements, lien paperwork, landlord approvals, and the risk that a delay costs you rent.
Neither option is always better. Here’s how each works, where the money and risk land, and what to ask before you choose.
What’s the difference between a landlord build and a tenant build?
People use these terms loosely, so it helps to sort deals by two questions: who hires the contractor, and who pays.
| Question | Landlord build (turnkey) | Landlord build with allowance | Tenant build with allowance |
|---|---|---|---|
| Who hires the contractor | Landlord | Landlord | You |
| Who manages design and construction | Landlord, to plans you approve | Landlord, to plans you approve | You, with landlord approval of plans and contractor |
| Who pays | Landlord, for the agreed scope | Landlord up to the allowance, you pay the rest | Landlord up to the allowance, you pay the rest |
| Who carries delay risk | Negotiated: completion date and rent start terms | Negotiated: completion date and rent start terms | Usually you, unless the landlord caused the delay |
| Your control over cost and quality | Lowest | Moderate | Highest |
The rules for all of this live in the work letter, the lease exhibit that spells out who builds what, who pays, and how approvals work. If you haven’t signed yet, our pre-lease checklist for spaces you’ll build out covers the work letter basics along with zoning, permit history, and building systems.
“Should I just let the landlord’s contractor do it?”
For many tenants, that’s a reasonable choice. A landlord build tends to work well when:
- The work is fairly standard: paint, flooring, a few walls, lighting.
- The landlord’s contractor already knows the building, its systems, and its rules.
- You don’t have the time or the staff to manage a construction project while running your business.
What you give up is control. A 2023 two-part series on lease work letters in the American Bar Association’s Probate & Property magazine describes common landlord-build terms. The landlord typically funds a fixed allowance, and you pay any excess before work begins. Changes you request are usually at your cost, often paid in advance. And delays caused by your changes generally don’t push back your rent start date.
There’s also a quieter issue. A tenant-side broker writing for Colliers warned that in a landlord-controlled build, if the work comes in under the estimate, the savings may stay with the landlord instead of going into your space.
None of that makes a landlord build a bad deal. It means the protections have to be in writing. The ABA series lists terms tenants commonly negotiate:
- See the numbers. Ask to review the contractor’s cost estimate, and ask about value engineering if it runs over budget.
- Define “done.” Substantial completion generally means you can move in and use the space, apart from minor punch list items. Some leases also require a certificate of occupancy.
- Set a completion date. Ask what happens if it’s missed. Some leases use liquidated damages, such as a day’s rent for each day of delay.
- Ask about the warranty. Landlords commonly offer around 12 months, and usually no longer than the contractor’s own warranty.
“What changes if I hire my own contractor?”
You choose who builds your space, bid the work, see every line item, and make decisions quickly when something comes up. That same Colliers broker preferred this route for quality control, value engineering, and competitive bidding.
But the landlord still has a say. According to the ABA series, a tenant build usually comes with these conditions:
- Plan approval. The landlord reviews your preliminary and final plans. Ask for a fixed review period, with approval treated as given if the landlord doesn’t respond in time.
- Contractor approval. Your contractor must be licensed in the state and approved by the landlord. Some landlords keep an approved list, especially for roof work, where a roof warranty can depend on who does it.
- Insurance. Expect to show workers’ compensation, liability coverage at set limits, and builder’s risk insurance, with certificates and landlord endorsements, before work starts.
- Lien paperwork. Landlords commonly require partial and final lien releases from your contractor and subcontractors. Some ask for a payment bond.
- Allowance paid in draws. The allowance is often paid as work progresses, against invoices, certifications, and lien waivers, with a portion held back as retainage. Final payment may require a certificate of occupancy, unconditional lien waivers, and, with many landlords, your business open and paying rent.
- Delay risk. In a tenant build, you usually carry the risk of delays, overruns, and defects unless the landlord caused them. Rent often starts on a fixed date either way.
Because allowance money often arrives after the work and the paperwork, plan how you’ll pay your contractor in between.
Why does the landlord care so much about liens?
Because unpaid subcontractors and suppliers can record a mechanics lien, and the landlord’s property is what they’d go after.
California Civil Code section 8444 lets an owner who did not contract for the work give a notice of nonresponsibility. It only works if the owner posts it on the site and records it within 10 days after learning of the work. California construction lawyers have pointed out that this notice often fails to protect a landlord whose lease authorized the tenant’s improvements.
That’s why landlords lean on approval rights, lien releases, and bonds. For you, clean lien paperwork keeps the allowance draws moving. We’re contractors, not lawyers, so have your attorney review how your lease handles liens.
What about the landlord’s supervision fee?
Many work letters let the landlord charge a fee for overseeing a tenant-managed build. CommercialCafe’s August 2026 guide to tenant improvement allowances describes it as commonly a percentage of the total allowance. The ABA series notes tenants often contest this charge and may get it waived, and the Colliers broker advised asking the landlord to waive or reduce it.
Ask three things: what the percentage is based on (the allowance or the total cost), whether it comes out of your allowance, and whether it can be capped.
Which one fits your project?
These are general tendencies from a builder’s point of view, not rules. Your lease, your landlord, and your space can change the answer.
| Your situation | Often leans toward |
|---|---|
| Simple refresh with standard finishes | Landlord build |
| No one on your team has time to manage construction | Landlord build, or a tenant build with a contractor who manages the whole process |
| Specialized space (restaurant, medical, lab, heavy equipment) | Tenant build, or a landlord build with strong tenant control over design |
| Tight budget where every dollar matters | Tenant build with competitive bids |
| Hard opening date | Either, with completion and delay terms in writing |
| Multi-tenant building with shared systems or roof warranties | Expect the landlord’s approved contractor list either way |
Whichever way you go, start with a realistic number. Our breakdown of what a commercial build-out costs in Los Angeles and Orange County explains why online figures disagree and how to price your own scope.
Questions to ask before you choose
- Is this deal turnkey, a landlord build with an allowance, or a tenant build with an allowance?
- If the landlord builds: can I see the bid, how are my changes priced and approved, and what happens if the completion date is missed?
- If I build: how long does the landlord have to review plans, and is there an approved contractor list?
- What insurance and endorsements does the landlord require from my contractor?
- How and when is the allowance paid, and what paperwork triggers each payment?
- Is there a supervision fee, and can it be waived, reduced, or capped?
- When does rent start, and does a construction delay move it?
- Who owns the improvements when the lease ends, and will anything have to be removed?
What can I handle myself, and when do I need a pro?
On your own: ask the landlord for the work letter, building construction rules, any approved contractor list, and existing drawings. List what your business needs, plus your target opening date.
With professionals: your attorney and broker handle the lease and work letter language. A contractor walk-through tells you what the space can support, what the build-out is likely to cost, and whether the allowance and schedule are realistic under either path. In a tenant build, your licensed contractor also handles the insurance certificates, lien releases, permits, and inspections the landlord will ask for.
De Sisto Construction, Inc. is a California licensed general contractor (CSLB #803545) based in Signal Hill, in business since 2001 and serving greater Los Angeles and Orange County. Our commercial tenant improvement services include guiding permitting, inspections, and code-compliance coordination, with step-by-step outlines and line-item project costing.
FAQ
What is a landlord build? The landlord hires the contractor and manages the build-out, usually to plans you approve. The landlord pays for an agreed scope or up to an allowance, and you typically pay anything above it.
What is a tenant build? You hire and manage your own licensed contractor, under the landlord’s approval rules. The landlord often contributes an allowance, usually paid in draws as the work is completed and documented.
Is a turnkey build-out a good deal? It can be, especially for simple spaces. You give up control over cost and quality, and if the work comes in under budget, the savings may stay with the landlord.
Can the landlord make me use their contractor? It depends on the lease. Many leases require landlord approval of your contractor, and some landlords keep an approved list, especially for roof work.
What is a landlord supervision fee? A fee for overseeing a tenant-managed build-out, commonly a percentage of the allowance. Tenants often negotiate to reduce, cap, or waive it.
Deciding who should build your space?
Whether your landlord builds or you do, a line-item budget before you sign shows whether the allowance and the schedule are realistic. We can walk the space, price the scope, and help you compare what each path would mean for your budget and your opening date.
Give us a call at 562-425-1050 or email us at info@desistogc.com (dcidirect.net)