When Your Tenants Leave …

Depending upon what your Lease specifies upon termination, the cost to “make good” the property can vary dramatically. Furthermore, the tenancy fit-out (and original condition) of the property can also impact on that cost.

Office Tenancies

OfficeYou will need to allow between $70 to $180 per square metre — depending upon the need to replace carpets and remove fixed partitioning.

Other things to consider are … the reinstating sprinklers, lighting and power outlets to restore the tenancy to an open-plan layout.

Industrial Properties

Here you could be looking at anywhere between $20 and $160 per square metre — depending upon the level of fixed partitioning and contamination caused by your tenant’s operations. Plus, damage to concrete floors (beyond normal wear and tear) can also be expensive to repair.

Retail Tenancies

Retail TenanciesMost incoming Retail tenants prefer a “bare shell” — so they can undertake a fit-out to reflect the specific nature of their business.

Therefore, the cost to completely remove an outgoing tenant’s fit-out could amount to $500 per square metre — when you take into account tiled flooring, fixed shelving, equipment and the like.

What happens in practice?

You’ll find that most Leases will require the tenant to make good. Therefore, the only area of dispute (apart from the cost) will be the actual condition of the tenancy, at the start of their Lease.

Ideally, you should be holding a copy of the ingoing Condition Report. But, more often than not, this can seldom be found. So, it will generally come down to a negotiated settlement.

Generally, you’ll find yourself in a better position by accepting a cash settlement, in lieu of asking for a physical “make good” by the tenant.

That way, your new tenant might well be able to adapt (or modify) the existing fit-out; and you could offer part of the cash payment you received, by way of an upfront incentive.

As you can appreciate, this is a complex area of tenancy relations; and one where you do need the right advice — preferably from the start of any new leases you enter into.

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