What is a leasehold improvement?

A leasehold improvement refers to modifications or alterations made to a leased space, allowing the tenant to customize the property to better suit their operational needs. This can include changes such as adding walls, installing custom lighting, or renovating the space to align with the specific requirements of a business.

These improvements are often necessary for tenants who may have particular functional or aesthetic desires that are not met by the original condition of the property. It also signifies the investment that a tenant is willing to make in a property to ensure it serves their purposes effectively during the lease period. The owner of the property typically retains ownership of these improvements even after the lease ends, depending on the terms agreed upon.

This concept is distinct from the process of transferring ownership of a property, performing routine maintenance, or appraising property value, which focus on different aspects of real estate transactions and management.