Premises Condition Reports can help avoid ‘ambiguity and disputes’, say NZIBS

NZIBS Article:

Premises Condition Reports aren’t used nearly enough which can cost landlords and tenants “large amounts of money”, says one registered building surveyor.

Rory Crosbie 2014
Rory Crosbie

New Zealand Institute of Building Surveyors member Rory Crosbie says preparing accurate records of a building’s condition at the beginning of a lease goes a long way to reducing ambiguity and disputes.

A schedule of condition prepared by a registered building surveyor and signed by both the landlord and the tenant, ensures any items in poor condition are recorded and make negotiations at lease end easier.

Agreement may be reached to either repair the item/s in disrepair at lease commencement.

The other option is to note its current condition, safeguarding the tenant from exposure at lease-end to put that element of the building back into a better
state.

“For example, an unwary tenant responsible for external repair works to a building may be required under the terms of the lease, to re-clad a building now failing to meet the requirements of the building code on a cavity based system,” says Rory.

“It may have been obvious at the outset that the cladding system was failing, but due to poor due diligence at lease commencement, both parties may not have recorded this.

“The lease terms may state to put the building back into a good state of repair, legally requiring the tenant to do the re-clad to avoid being in breach of the lease clauses.”

Mr Crosbie says lack of evidence of the original building’s condition creates many disputes when preparing lease reinstatement reports.

If the tenant fails to reinstate the premises to lease commencement date condition, then any costs incurred by the landlord in reinstating the premises will be recoverable from the tenant.

“For this reason we always recommend to landlords and tenants that they prepare premises condition reports at lease-commence or lease-renewal,” says Rory.

“A schedule of reinstatement should only list items for which the tenant is responsible for under the lease terms.”

However, an understandable interpretation of the lease needs to be made clear to both the landlord and tenant as their responsibilities within the agreement will differ.

A landlord will view the tenant’s responsibility as rebuilding the premises, whereas a tenant will often take the view that they’re only responsible for giving the building a ‘lick of paint’, explains Rory.

That’s where a registered building surveyor comes in handy, because large amounts of money can be lost and/or gained depending on how lease repairing obligations are interpreted.

Building Surveyors are trained to understand the performance of building fabric and the technical and legislative issues, and therefor are well placed to complete this work.

New Zealand Institute of Building Surveyors Inc. PO Box 30900, Lower Hutt 5040. Phone 0800 11 34 00 www.buildingsurveyors.co.nz “While understanding the lease is important, one should have due regard to the age, character and location of the building,” says Rory.

“If a premises condition report is available as record of condition at the beginning of the lease this baseline record of condition defines the required level of make good required.

“Surveyors usually work closely with the legal profession during the interpretation of lease clause, the issuing of schedules and other specialist consultants and contractors during the claim negotiation process.”

Rory stresses these reports aren’t completed “often enough”.

But landlords and tenants are becoming increasingly aware of them and the value they can potentially gain by employing a registered building surveyor to guide them through the lease reinstatement process.

http://www.buildingsurveyors.co.nz/wp-content/uploads/2016/05/Premises-Condition-Reports-avoid-ambiguity-and-disputes-say-NZIBS-010616.pdf

To find out more about Premises Condition Reports please call 0800 PRENDOS or email [email protected]

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