Schedule of Condition

• A schedule documenting the state of repair of a premises prepared at, or immediately prior to, the lease commencement and prior to any of the tenant's works being carried out. Knowing from the start will help stop you from signing a lease that states it’s in good condition, when it actually isn’t. It is also a useful way of limiting your liability under a lease.

Maintenance

• Good maintenance and facilities management during your occupation of the property will also help minimise your end of lease liabilities.

Alterations

• If you intend to alter or fit out the property, be sure to follow the lease procedures as you might require written permission from the landlord to do so. And at the end of the lease, you might not have to remove alterations if the landlord does not request their removal.

Timing

• During the course of a lease term the lessee will be able to repair, decorate and maintain the demise in accordance with their lease obligations. However, once the lease has ended and the lessee no longer has access to the premises, the only form of remedy to address make-good obligations is damages.
• It is therefore important that both parties enter into dialogue in good time before lease end.
• In many cases, 6-12 months may be required, depending on the size of the premises and likely complexity that the condition of the fit out and building will bring. This will not only allow both parties to consider their position and allow reasoned consideration and establishment of the tenant's make-good liabilities and intentions, it may also assist in avoiding friction between the parties.
• Sufficient time can also allow the tenant time to choose to meet their obligations by carrying out the make-good works or to make a monetary settlement.
• Where there is insufficient time to carry out make-good works, the lessee is usually obliged to make a monetary settlement.

Tenant

• The potential savings and environmental waste reduced in successfully placing a replacement tenant to take over your office in its existing condition can be huge, saving both cost and time for both sitting tenant and incoming tenant. Indeed, often this is subject to the marketability and adaptability of the existing fit-out.
• With prospectives tenants on the table, a landlord may or may not enforce the terms of the lease and instead decide to keep the space in 'as is' condition or accept a financial desposit or settlement on a case by case basis.

Incoming Tenant

• While reinstatement liabilities will be passed onto the incoming tenant, thorough due dilligence will be conducted for the incoming tenant to assess the overall cost savings of taking over the premises in 'as is' condition.
• Often, there are huge savings for the incoming tenant in terms of time and money saved from a new office fit out. To learn more, refer to the SAVVI office design and fit-out guide here.

Landlord

• Landlord reduces void rental period and recieves offers to take over the fitted space near or close to the naturual lease expiry. Should the new incoming tenant request to take the space in bareshell condition, an open discussion between all parties will be led by SAVVI to find a mutually beneficial arrangement.

When is the right time to think about reintatement?

Before you take a lease. A survey will establish the condition of the premises, giving an indication of work that may be needed, both immediately and later.

If the premises are already in bad repair, special considerations apply (see below). During the term of the lease, regular or planned maintenance can avoid greater expense later. It is usually a good idea to record the condition and layout of the premises before you occupy.

What if the premises was in a poor state from the outset?

Most commercial leases require the tenant to put and keep the property in repair. Unless you and the landlord specifically agree otherwise, the fact that the premises were in a poor condition when you took them on is largely irrelevant. You still have to put them right.

Negotiate to agree with the landlord that the premises be returned at the end of the lease in a condition similar to the state in which you took them. In this case, after you have had the premises surveyed, make sure that their condition is established, recorded and attached to the lease as a ‘schedule of condition’. Ensure that your solicitor varies the lease clauses to reflect the reduced obligations.

What is the position on renovations that we have made?

This depends on the terms of the lease that the landlord granted you to make alterations. On granting consent for alterations the landlord probably required that at the end of the lease you restore the property to its original state if requested to do so.

Therefore, unless the landlord thinks your alterations have added value, you will probably be required to reinstate the property at the end of the lease or pay the cost. The exception is if neither the lease nor the licence for alterations gives the landlord the option of requesting reinstatement.

Is the landlord’s reinstatement quotation negotiatble?

No, do not accept it without taking professional advisor who may be able to reduce the figures and / or demonstrate that certain items should not have been claimed. The landlord may not in fact intend to reinstate the property; to remarket the premises.

Often, a holding deposit can be negotiated with the landlord and returned subject to the premises being let out in 'as is' condition, within an agreed set timeframe.