What you describe is Tenant leasehold improvements that are being proposed to be funded by a building owner. This is done all the time there are many ways to approach it. The most common way is to get a solid estimate for the cost of improvements. The owner / landlord pays for the work to be done and then adds it to the rental. For example, let's say the office space "as-is" was proposed and agreed upon to rent for $15 /SF annually ($30,000 / year). Now the tenant want $150K of improvements placed into the premises by the LL on his behalf. Let's assume first of all that the owner is satisfied with the financial status and lease guaranty of the dentist -- absent that, the whole deal is questionable. Regardless of type or cost, one should almost always assume that the bulk of these improvements will be worthless at the end of the dentist's lease so they must be amortized over the term of the lease. If the cost is $150,000 and the lease is for 10 years and the owner desires a 10% return on his invested money, then that would add $1,982 / month or $23,787 annually to the lease. The rent for the finished space "as-custom-improved" would then be $53,787 rather than $30,000 a year. Whether or not that addition to rent goes away after 10 years (assuming the dentist stays on) is negotiable based on other factors such as if there are mid-lease rent escalations etc. Again -- one would want to be first satisfied with the financial condition and credit worthiness of the tenant prior to making the investment. Another way of handling it would be to keep the rent at $30K and have the dentist sign and guaranty a promissory note for the cost of the improvements -- treating it like a loan. Hope this helps you.
Nov 16, 2011