For landlords, there are several steps to complete at the end of a retail lease. This can be overwhelming, as it is important that time is taken to ensure these steps are correctly carried out. Following these steps can help ensure that your property is returned to you in the right condition, thereby allowing you to to lease the property to a new tenant easily. This article will serve as a checklist for important steps that landlords should implement at the end of their retail lease.
A Few Months Before the End of the Lease
As a landlord, there are some things to consider as you approach the end of the lease. Speaking to the tenant about redecoration, repair and any make good obligations in advance of the end of their lease will give you adequate time to ensure everything is completed to your desired standard.
Clearly let the tenant know your expectations with regards to the standard of the make good work. It is useful to set a date so that you and the tenant know when the works must be complete.
Redecoration and Repair
Check whether the tenant has any redecorations obligations under the lease. It Is common for leases to contain a clause that state the tenant must redecorate in the last few months of the term. This can include:
- repainting the walls;
- replacing carpets;
- refinishing floorings; or
- restoring other surfaces.
Ensure both parties understand and agree to the standard to which this must be carried out. For example, the lease may state that the tenant must repaint the walls with two coats of paint in a colour chosen by the landlord.
Make Good Obligations
Check the make good clauses in the lease and see what the tenant is required to do at the end of the lease. This usually requires the tenant to return the property to the condition it was at the beginning of the lease. There is typically an exclusion for fair wear and tear. Make good works can include:
- removing all of their fittings and fixtures which they installed for fit-out during their tenancy;
- fixing any damage that is caused by removing the fittings; and
- cleaning the property thoroughly.
If a condition report was completed at the start of the lease, you can refer to this to see what condition the property should be returned to. If you are not sure what the tenant’s make good obligations are, you should have the make good clauses reviewed by a leasing lawyer.
At the End of the Lease
After the completion date of the make good works, contact the tenant to ensure that the works are complete. Following this, organise a time with the tenant to inspect the property. It is vital that you assess the redecoration and make good works to see if they satisfy what the lease requires.
If the tenant has not completed the make good works to the required standard, you need to notify them promptly. Depending on the terms of your lease, you can engage contractors to repair and clean the property at the tenant’s cost.
You should check the bank guarantee clause in the lease, as you may be able to use this money to cover these costs. Sometimes you need to provide the tenant with written notice first.
Once you are satisfied with the make good works and the condition of the property, consider whether there are any other outstanding obligations the tenant must satisfy under the lease.
For example, the tenant may have outstanding rental and outgoings payments. If any money is overdue, provide the tenant with a notice to pay the outstanding amount. Depending on your lease the tenant may be in default, and this may trigger a termination.
Security Deposit or Bank Guarantee
After the tenant has satisfied all obligations under the lease, you must return the security deposit or bank guarantee to the tenant. Check your lease to see what the time frame is for returning the security deposit or bank guarantee. If your lease does not specify a timeframe, you should return it as soon as reasonably possible. Alternatively, you should follow retail lease legislation. For example, in NSW the required timeframe is two months after the tenant has satisfied its obligations under the lease.
Deed of Surrender
If the lease is ending early and both parties have agreed to surrender the lease, you will need to arrange and sign a deed of surrender. This should be on terms that both parties agree upon.
There are several key steps that a landlord should take at the end of the lease. This will help ensure that the property is returned to you in a satisfactory condition. You should:
- arrange a time with the tenant for them to carry out make good works;
- inspect the property afterwards; and
- return any bank guarantee to the tenant.
If you need help determining your rights at the end of a lease, call LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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