End of commercial lease checklist

All commercial leases end some time, and it’s vital that landlords (or their property managers) and tenants prepare for that time well in advance. There are legal obligations for both parties, and it’s also just good business practice to plan ahead.

Comply with any ‘make good’ clause in the lease

Most Mount Isa commercial property leases contain a ‘make good’ clause. If your lease has this clause, it’s the responsibility of the tenant to return the property to the condition it was in at the time the lease started.

This may be necessary if a tenant has done a custom fit-out or made any other landlord-approved alterations to the property.

However, before going to the expense of having this done, tenants should check with their landlord that they do want the property returned to its original state. Depending on the next tenant that the landlord has secured or the value that the fit-out/alteration may have added to the property, the landlord may be happy for some (or all) of the changes to remain in place.

However, commercial landlords are within their rights to insist that their properties are returned to their original condition if the lease contains a make good clause (as most commercial property leases do). They may also be entitled to ask this under common law as well. ‘Fair wear and tear’ is often included in ‘make good’ clauses.

It’s a good idea for both tenants and landlords to have accurate records of the condition of the property upon entry, including photographic evidence. This can help to avoid disputes or misunderstandings over time, especially on longer-term Mt Isa commercial property leases.

Communicate your future intentions well before your lease ends

This is important for both commercial property landlords (or their property managers) and tenants. One or both parties may want the lease to be renewed or extended.

Discussing this possibility well before the lease ends (for example, six months or more from the lease expiry date) helps to maximise the chances of either of these things happening, particularly if the lease doesn’t contain an option to renew clause.

It’s in a landlord’s interest to retain good, long-term tenants, and it’s in a tenant’s interest to renew commercial property leases on premises that are beneficial for their businesses.

It’s also the interests of both landlords and tenants to know as far as possible in advance if the lease won’t be renewed or extended. Landlords need time to find new tenants to minimise any vacancy period. Tenants also need time to find new premises and to arrange for all of their assets to be moved out.

Sort out the bank guarantee provisions well in advance

The bank guarantee is the tenant’s security deposit on a commercial property. The lease will contain provisions for the timing and conditions of the security guarantee release, and both landlords and tenants should ensure they meet all their obligations for it to be released in full and on time.

To avoid issues, landlords should issue tenants with fault notices for any issues that need to be remedied well before the lease expiry date. Tenants should remedy these fault notices as soon as possible and before the lease expiry date.

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