Reminder…make sure the terms of your lease are clear!

Michael leased motel premises from Sally. Under the lease, it was agreed that Michael would maintain the interior of the motel, and pay a percentage of the annual rent into a maintenance fund. Michael could then use the fund to carry out his maintenance obligations under the lease.

A couple of years into the lease, Michael started receiving complaints from guests that heat pumps were pumping out cold air, and spa pools were not heating properly. It became apparent that these items in the motels were at the end of their service life.

Michael approached Sally about fixing them, but Sally said that this was Michael’s responsibility. Things turned sour between the two, but eventually the parties agreed that Michael owned the heat pumps and spa heaters.

Michael assumed that this meant he could use the maintenance fund to repair them, but Sally thought that this was entirely Michael’s responsibility.

Things came to a head when Michael attempted to use the maintenance fund to fix the issues with the heat pumps and spa pools. Sally angrily wrote to Michael demanding that he reimburse the fund. The parties instructed lawyers, and, after a lengthy exchange of letters, the matter ended up in court.

The court looked at the nature of the items and found that because they were part of the interior, Michael had the responsibility to maintain them, but could use the maintenance fund for that purpose.

This example is very similar to a recent High Court case, which is a further reminder for tenants and landlords to make sure that the terms of their lease are clear and set out what both parties are required to do.

Otherwise, both lessors and lessees risk expensive litigation to have a court work out the terms for them.