What are "leasehold improvements"?

Leasehold improvements refer to the modifications, enhancements, or renovations made to a rental property specifically to meet the needs and preferences of a tenant. These improvements are typically undertaken at the tenant's expense and can include changes such as installing new fixtures, painting, or reconfiguring the space to better suit the tenant's operational requirements.

This definition is significant because leasehold improvements differ from general renovations made on properties owned by individuals or entities. They are directly tied to the terms of the lease agreement between the landlord and tenant. While tenants may seek to personalize or enhance a rental space through these improvements, the property itself will revert to the landlord at the end of the lease, often with the improvements left intact unless otherwise negotiated.

Infrastructure improvements for commercial properties, renovations made on owned properties, and changes to public property areas do not accurately capture the essence of leasehold improvements, as they either pertain to ownership changes or public domain considerations rather than tenant-specific modifications within a lease agreement.