June 2024

Negotiating a commercial lease and getting it executed can be a complex and involved process, whether you are a landlord or a tenant. However, time and again, landlords and tenants miss a crucial step with potential consequences many years down the track. A step which if completed can simplify the exit matters at the end of a lease – the often-forgotten premises condition report.

The Auckland District Law Society (ADLS) Deed of Lease, which is the standard form document that most leases are drafted on, requires that at the end of the lease, the tenant reinstate the premises to the condition it was in at the start of the lease. If the tenant fails to reinstate the premises, then any costs incurred by the landlord in reinstating the premises are recoverable from the tenant.

This is where the premises condition report does the heavy lifting. If the landlord and tenant have completed the premises condition report at the start of the lease, there can be little argument over the condition that the tenant must return the premises to, and which items belong to which party. Completing the report also provides certainty, which allows landlords and tenants to accurately budget and plan for expenses that they are likely to incur.

Without a premises condition report, parties are often unable to recall or agree on the condition of the premises at the start of the lease.

The important point to take away from this, is that whether you are a landlord or a tenant, take the time during the negotiation of your lease to agree and document in photos and writing the condition of the premises and save yourself from any nasty surprises or expenses at the end of the lease.

If you would like more in-depth advice or further information about the content of this article, please get in touch with your lawyer.