shutterstock 325944311 MidRes blog

The Premises Condition Report – why you should really pay attention

29 April 2016, by Chris Ware

Limiting your reinstatement obligations is a key objective for any leaseholder. However, during commercial negotiations, defining and understanding reinstatement obligations can often fall by the wayside when trying to agree final terms, design cost and incentive arrangements. Reinstatement can become a costly issue for tenants if the final obligations are not agreed and documented correctly.

Two key issues we regularly see are:

  • The landlord and tenant fixtures and fittings not being recorded
  • No premises plan being attached for the deed of lease to show the layout of the premises at the lease commencement

This means there is no benchmark to establish what the reinstatement obligations are.

In both these instances, finding the answers to who owns what, what the premises looked like at lease commencement, and the subsequent layout and fitout changes made can be a very difficult task. This can be further complicated if a building is sold during the term of the lease or if subleases are in place and there is a poorly drafted lease terms which are open to interpretation.

Introducing the Premises Condition Report

In 2012, the Auckland District Law Society updated its 6th Edition Deed of Lease to include provisions for a Premises Condition Report to be populated and included in the final lease documentation. It was a major step forward. The Report gives the landlord and the tenant the ability to record what the premises looked like at the lease commencement, provide clarity of the reinstatement or lease exit obligations and also provide a baseline of what the tenant’s maintenance obligations should be. The Report is a written or photographic record of the premises and, in many cases, can double as a record of the landlord’s fixtures and fittings.

The Report helps both the tenant and landlord be more aware of the reinstatement obligations. In particular, the tenant should be in a better position to understand what happens if they have made improvements or additions to the landlord’s asset throughout the lease term.

It’s vital work that we can help you do right

We embrace the Premises Condition Reports and make sure all our clients understand the Report’s content prior to agreeing and signing the final lease.

Our comprehensive process includes:

  • Inspecting the property so we can challenge elements of the Report we don’t agree with
  • Seeking clarifications from the landlord on unclear details to be ensure the document is recorded accurately
  • Ask for re-definition of things that seem ill-defined
  • Looking closely for omissions and errors
  • Ensuring clients understand every lease exist obligation

Careful negotiation, documentation and completion of the Premise Condition Report helps minimise disputes between landlords and tenants at lease commencement. While this may not be the most interesting part of the signing up for your premises, a bit of patience at the front end of the process and doing it right will save you money, arguments and wasted time later.  

...

About the author

Two boys and a wife. Bikes, runs, lifts stuff. Wannabe chippie. Renovates. Played right back.

Chris leads our Advisory22 practice area, which includes our property consultancy and tenant representation workstreams and is part of the TwentyTwo Leadership Team. He has over 15 years' property experience working in both landlord and tenant representative roles. He joined the TwentyTwo tribe in 2014 and has since led a number of large leasing transactions, representing clients in project leadership and tenant representation roles.

Other posts by this author...

10 July 2023

Enhancing Maritime NZ's operations and future-proofing property solutions

At TwentyTwo, we are proud to have partnered with Maritime NZ, an organisation dedicated to ensuring Aotearoa has safe, secure, clean and sustainable oceans and waterways.

Read more...

24 May 2023

Unleashing inspiration and revitalisation: Highlights from the CoreNet [Revival] Symposium 2023

The CoreNet [Revival] Symposium took place in Auckland last week igniting a wave of inspiration and knowledge-sharing among attendees.

Read more...

01 May 2023

Wētā FX doubles its VFX Vancouver studio space with the help of TwentyTwo

When Wētā FX opened its doors to its new Vancouver office a year ago, it marked the company’s first dedicated visual effects studio outside of New Zealand after its 2021 $1.

Read more...

07 April 2022

Office fitout project – what are the delivery options?

Your premises search and lease negotiations are complete, you have a general understanding of the next steps and a ‘bums on seats’ target date to meet.

Read more...

28 November 2021

Teaching Council: Fast-track delivery

When the Teaching Council of Aotearoa NZ – the professional body for teachers in early childhood education, primary and secondary schooling – needed support finding a new solution for their head office of 100+ staff by the end of 2020, TwentyTwo jumped into action…The scope: Space required: Minimum 1200m2 Special requirements: Single floor and NBS of 80% + Delivery date: By Q2 2021 Teaching Council first approached us seeking advice about how they could obtain more certainty from their existing landlord to complete overdue seismic works as their lease renewal quickly approached.

Read more...

04 August 2021

TwentyTwo helps negotiate new property solution for Northpower

In 2019, Northpower engaged TwentyTwo to help secure a new Wellington site for their team and consolidate their operations onto one location.

Read more...

15 April 2021

When leasing a commercial property, who is responsible for the heating and lift maintenance?

Ensure your expectations match your landlords and you’re not left in the cold.

Read more...

18 November 2019

Thinking of leasing or buying new premises in 2020?

 TwentyTwo's Chris Ware on what you need to consider before you start looking at property options, to ensure you get the best outcome for your organisaton.

Read more...

18 May 2017

Intergen – a standout in our high-tech capital

Wellington has an international reputation as a technology hotbed – and for being home to some of the leading innovators in this growing sector.

Read more...

26 January 2016

TwentyTwo helps reshape Intergen’s future in Wellington

Following on from our work with Intergen to deliver an all-in-one premises procurement, workplace planning and design solution in Auckland, TwentyTwo has now led the procurement of new office space in Wellington.

Read more...

22 October 2015

Lease negotiation + workplace planning = high-value solution

Leading New Zealand IT business Intergen engaged TwentyTwo in February 2015 to deliver an all-in-one premises procurement, workplace planning and design solution to deliver a new location for its Auckland operation by December 2015.

Read more...

04 June 2015

Sports on the move in Auckland

After working with Sport New Zealand to develop a framework to house sporting agencies in one location and develop a 'Sports Hub', TwentyTwo has helped Sport NZTriathlon NZAktive Sport and Hockey NZ to secure a lease for new premises in Eden Business Park.

Read more...