The Importance of Completing a Premises Condition Report in a Commercial Lease

A local business gave notice to their landlord to terminate their commercial tenancy. The parties did not have a great relationship. The landlord wanted the tenant to reinstate the premises before vacating as required under the terms of the lease.

The tenant felt that they had already improved the condition of the premises by painting and installing new cabinetry, and should not have to do any additional work.

Unfortunately, neither party had any evidence of the condition of the premises at the commencement of the Lease and could not reach an agreement.

Under the terms of a lease, a tenant is required to reinstate the premises to the condition they were in at the commencement of the Lease. This may require them to remove their own fixtures and fittings and reinstate the landlord’s fixtures and fittings. Unfortunately it is very difficult to establish the tenant’s obligations upon termination if no record has been maintained.

We recommend that the parties always complete the Fifth Schedule (Landlord’s fixtures and fittings) and Sixth Schedule (Premises condition report) in a Commercial Lease (either in writing or by including photographs). This gives a clear record of the condition of the premises at commencement, giving both parties certainty about their obligations which usually helps to avoid a dispute.

Before entering into a Commercial lease it pays to take legal advice.