Commercial Leases: An issue that I regularly advise on is the extent of a tenant’s reinstatement and make good obligations under a commercial lease when the lease comes to an end.
By Arthur Chung – Partner
- The associated costs can be substantial and disputes often arise when a landlord and tenant have different expectations and understanding of what is required to satisfy these obligations. Whether you are a commercial landlord or tenant, here are some important considerations to bear in mind if you are faced with this issue.
- What do the expressed terms of the lease require of the tenant?
- Are there any implied covenants at law that may need to be considered together with the expressed terms? (Some leases expressly exclude the application of the implied covenants.)
- Is there evidence of the condition of the premises at the start of the lease or some other relevant time (such as photos and/or a premises condition report) by which the tenant’s obligations are to be referred to? Have there been any additions or alterations to the premises during the term which need to be taken into account?
- Are the obligations limited in any way, such as being subject to a fair wear and tear exception?
- Who owns the fixtures, fittings, chattels and additions to the premises?
- Has the tenant and the landlord been carrying out their respective maintenance obligations (including any redecoration obligations) during the term and if not, to what extent has the deferred or lack of maintenance affected the condition of the premises?
- Has there been any lease renewals or assignments that may affect how the reinstatement and make good obligations apply to the current tenant?
- Has the tenant’s use of the premises resulted in any contamination which may require removal, remedial works and/or ongoing monitoring?
- When does the lease require the reinstatement and makegood to be completed and what happens if the works are not completed by that date?
- How does the landlord intend to use the premises after the tenant vacates?