Lease Make Good – Pre Nup
Headaches and protracted negotiations at lease expiry could be avoided by well drafted Make Good clauses and thought out strategies prior to lease commencement.
Building owners and tenants can be poles apart in their understanding and interpretation of repair, maintenance and other make good related clauses. This in turn can lead to significant unforeseen costs, disputes and delayed income.
Attention to the lease definitions and obligations together with some good asset management strategies can help to avoid such situations.
Your lease and make good check list in this regard could include some thought around the following:
Premises
- What are the physical elements and spaces under the obligation of each party?
Commencement Date
- Does the obligation for repair, maintenance and make good extend to any previous terms of occupation perhaps under an earlier lease or option?
Condition as at Commencement
- If the tenant is expected to return the property back to a condition ‘as at commencement’ – can anyone recall what this looked and felt like?
- Is it well defined and recorded in a schedule of condition with plans and photographs? Continue reading
Taking the ‘Sting out of the Tail’ at Lease Expiry
Disruption, potential unplanned costs and conflict at the end of a lease due to make good obligations can sour what has been a solid commercial relationship between landlord and tenant. This can complicate the tenant’s move or the re-letting of the premises. The pressures of a poorly set up lease in terms of documentation, understanding of the consequences of the relevant clauses from a technical perspective and agreement as to the condition at occupation, or of future alterations, are self evident for both parties.
Properly qualified building consultants should be actively utilised in such processes due to their knowledge and understanding of leasing and legal aspects combined with their expertise in building conditioning and rectification. The proactive stance is to bring all parties together prior to the signing of the lease to agree not only the terms of occupation, lease and physical condition but also to the process at lease expiry.
If this process has not been followed, the building consultant plays a key role in interpreting the relevant lease clauses and evaluating the property’s condition so to effectively define the make good obligations, the cost and the best method of rectification. Continue reading
