Picking the wrong tenant improvement contractor can cost you thousands in delays, budget overruns, and shoddy finishes. Your lease timeline is fixed, your budget isn't flexible, and your space needs to function the day you move in. Here's exactly what to check before signing a contract.
Verify Licensing and Insurance
Start with the fundamentals. Ask contractors for proof of a current contractor's license specific to your state or municipality—don't just take their word. Cross-check the license number with your state's licensing board online; it takes five minutes and catches fraudsters immediately.
Confirm they carry general liability insurance (minimum $1 million for most TI projects) and workers' compensation insurance. Request certificates of insurance that name your company as an additional insured. If they balk or delay, move on—legitimate contractors have this ready.
Review Their TI Portfolio and References
Tenant improvement is specialized work. A contractor who builds residential decks may not understand ADA compliance for commercial restrooms or how to coordinate with building management during a build-out. Ask for three to five completed projects similar in scope to yours—same building type, square footage range, and complexity level.
Contact those references directly. Don't rely on testimonials from the contractor's website. Ask specific questions: Did they finish on time? How did they handle unexpected conditions? Was communication consistent? Were there change orders, and how were they managed?
Request Detailed Written Estimates
Get bids from at least three contractors. A proper estimate breaks down labor, materials, permits, and contingencies—not a lump-sum guess. Compare the same scope of work across all bids; if one is 30% cheaper than others, understand why before celebrating.
Ensure the estimate includes:
- Hourly labor rates or fixed labor costs
- Material pricing (quoted from suppliers, not inflated markups)
- Timeline and milestone schedule
- Contingency percentage (typically 10–15% for TI work)
- Allowances for unknown conditions (wall cavity inspections, asbestos testing if older building)
- Permit and inspection fees
- Utility coordination costs (HVAC tie-ins, electrical panel upgrades)
Check Project Management and Communication
During your initial conversation, ask how they manage day-to-day communication. Will you get a dedicated project manager? How often do you meet? Can you access a shared portal or schedule?
TI projects move fast and hit snags constantly. A contractor who communicates proactively about delays (before they balloon) and immediately flags code compliance issues saves you far more than one who waits until problems are critical. Confirm their process for change orders in writing—this prevents scope creep and surprise invoices.
Assess Subcontractor Relationships
Tenant improvement contractors oversee multiple trades: electricians, plumbers, HVAC technicians, drywall crews. Ask who their regular subs are and whether they have long-standing relationships. Confirm those subcontractors are also licensed and insured. A contractor with a stable crew finishes predictably; one who hires different people each project introduces risk.
Request a list of trade partners and their license numbers. Spot-check one or two through your state's licensing board.
Understand Their Approach to Unexpected Conditions
Old buildings hide surprises. During construction, crews often discover hidden structural issues, outdated wiring, or hazardous materials. Ask the contractor: How do you handle discovery of asbestos? What if the slab is uneven? Who pays for corrective work?
Get this answered in writing within your contract, not verbally during the project when costs spiral. Know in advance which issues fall under their contract and which become change orders.
Compare and Make Your Final Choice
Use a simple spreadsheet to score contractors: licensing check, insurance verification, portfolio alignment, price competitiveness, communication style, and timeline feasibility. Mercoly lets you compare vetted tenant improvement and build-out contractors in one place, which streamlines this process considerably.
Trust your gut on the project manager's responsiveness and clarity. Price matters, but the cheapest bid often reflects the contractor's plan to minimize overhead—at your expense.
Frequently Asked Questions
Q: What's a realistic contingency budget for unexpected conditions in tenant improvement? Most contractors recommend 10–15% of the total project cost; for a $100,000 build-out, that's $10,000–$15,000 set aside for surprises like structural repairs or code upgrades discovered mid-project.
Q: How long should a typical tenant improvement project take? It depends on scope, but 2,000–5,000 square feet typically takes 8–16 weeks from permit approval to final inspection; always add 2–3 weeks for permit delays and unexpected conditions.
Q: Should I hire a contractor my landlord recommends? Not automatically—vet them the same way, since landlord relationships can obscure quality issues; however, contractors familiar with your building do understand its quirks and systems, which can save time.
Start vetting today, and don't rush the reference-check phase—it's where most problems get caught early.