Understanding your obligations around your lease fit-out

Obligations on lease fit outs

Many businesses are tenants in their selected premises, and with this comes a raft of responsibilities and legalities that need to be negotiated and will form part of your lease agreement.

In our next few blogs we will look at some of the commonly queried situations that might arise during your lease of an office or retail space, or what can arise should you be considering entering a new property lease.

For example, you want to upgrade your lease fit-out - who pays for this?
Rent reviews - can your landlord randomly choose when to do these? And, what's the expectation (and difference) between and around refurbishment, repairs and maintenance and redevelopment.

This week we look at fit-outs and your obligations

It's fair to say, the majority of premises will need fixtures, fittings and services installed before you can begin to trade. Who's responsible for the fit-out costs is determined by negotiation and agreement between the tenant and the landlord at the time of putting the lease in place.

Negotiate for as much as possible, your business however will pay for significant parts of the fit-out, meaning when you leave that premises it remains your property and can be taken with you when the lease ends.

Many landlords will and do use contributions towards fit-out as an incentive to secure your tenancy - negotiate the best possible way of utilising their financial input - maybe it goes into fixed services like plumbing, partition walls, architectural design elements, electrical wiring, painting of the building, etc.

It's not uncommon for the landlord to specify which tradespeople must be used. This protects the quality and image of the shopping centre or premises, but can add substantially to the fit-out costs of leasing the premises. Some Malls may also insist you do a new fit-out every so-many years and to a specified level – make sure you understand, and budget for, what is required.

Another recommendation is to ensure your lease contains an inventory of the landlord’s fixtures and fittings and your rights to install, change and remove fixtures. As always - get everything in writing. If there is something you want to alter that is not specified in the lease - get confirmation in writing first.

Make good clauses

When it's time to leave, your lease will have a 'make good' clauses that requires you to reinstate the premises to the condition it was in at the start of the tenancy. This generally requires the tenant to remove their fit-out at a considerable cost to the tenant. Make sure you budget for this.

Where there is fit-out already in place at the time of taking the lease, try and negotiate or reduce any requirement to make good, other than your general obligation to leave the premises in good repair, clean and tidy.

Find out more about leasing Commercial Property.

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