dispute
Wouter Jellema discusses how to manage disputes towards the end of a commercial property lease. Image – Canva.
  • Disputes towards the end of a tenancy do occur
  • Wouter Jellema recommends using the same property lawyers over the same tenancy
  • Shannon Davies offers advice

One of the most controversial moments in commercial property management is when the parties are approaching the end of their tenancy.

Although in most lease agreements it is detailed what the parties’ requirements, rights, and obligations are, we often manage disputes towards the end.

The negotiations that often occur revolve around the make good, the release of the bond or bank guarantee, the payment of rent and outgoings and other terms that should already be agreed to within the original lease documents.

So the question comes up – why do these disputes take place?

“It is important to ensure a lease document and any renewals, extensions, assignments, or new leases refer to the moment of the first occupation of the property when referring to the lessees’ make good responsibilities, unless specifically agreed otherwise,” explains Shannon Davies of Stork Davies Legal Advisor, and a fellow The Property Tribune contributor.

A valuable tool that property managers use to help determine how the lessor handed over the property to the lessee at the commencement is a property condition report.

This report, together with the annual routine inspection and the final inspection at the end of a tenancy, will help compare the two moments in time.

Once the parties know what is required, the tenant will start the make good project, and they will aim to hand it over before the end of their term or any further period as agreed.

But, what happens when the tenant does not meet the deadline and the lease has expired?

Will the lessor take over the responsibilities?

Will the lease get extended and roll into holding over?

Or, is there a different solution to this scenario?

“If the lease term has expired, but there are outstanding make good obligations, it is important that the parties be aware of the potential rights and remedies that the lessor may exercise,” added Mr Davies.

“These include, for example, the right to recover liquidated damages at a daily rate, the right to draw lease securities, and the right to recover the cost of undertaking make good works from the lessee.”

Shannon Davies, Stork Davies Legal Advisor

The role of a property manager is to assist with the negotiations and endeavour to facilitate an amicable separation of the tenancies. Unfortunately, disputes remain unresolved sometimes, and legal action might be the only solution to resolve the matter.

I recommend that the lessor uses the same property lawyers for the initial preparation of the lease and any other or additional agreements, and any dispute resolution during and after the tenancy.

Luckily, most tenancies have little to no disputes, but it often occurs at the end when the situation takes a turn.

Having an experienced property manager on your side that knows where to find the obligations of the parties in a lease and communicate these clauses to you in plain English is essential during these situations.

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