Lease reinstatement surveys, also known as lease dilapidation surveys, involve reviewing and analysing lease “make-good” clauses, identifying breaches, assessing repair requirements, and estimating the costs of remediation/make good.
Insight into lease reinstatement liability is usually sought by tenants or landlords prior to lease exit. But in this case, our overseas client approached us to provide lease reinstatement cost advice on industrial properties leased by a New Zealand company they were acquiring, to make them fully aware of any potential liability they would take on as part of the acquisition.
RICS-regulated firms like Prendos are familiar with the process and protocols used for lease reinstatement surveys in New Zealand and overseas. This becomes important during the settlement of disputes, as there is a tendency in complex New Zealand claims to refer to legal precedents established overseas. Our client therefore had confidence they would benefit from a globally recognised standard of expertise by engaging Prendos.
Our task was to review all lease make-good clauses, inspect each property to identify necessary repairs, and prepare reports and valuations for potential lease-end liabilities. The properties were spread across New Zealand and the east coast of Australia, and the client needed fast results due to a short due diligence period tied to the sale.
Thanks to our nationwide presence, we were able to complete all inspections across New Zealand smoothly once access was arranged. For the Australian properties, one of our Building Surveyors quickly visited Sydney, while another took a two-day trip to Brisbane.
The company being acquired had occupied most of the properties for over 15 years, and had been on the market for several years. Maintaining the properties hadn’t been a priority for them, and little to no investment had been made in their upkeep. There were also no provisions for lease-end make-good costs in the company’s financial accounts. Our surveys subsequently revealed significant make-good liabilities at several properties, as the premises were not being maintained in accordance with the lease terms.
Our coordinated team of Chartered Building Surveyors and Quantity Surveyors prepared schedules detailing the reinstatement and repairing breaches. These outlined the potential make-good liabilities for each property, and our QS team valued the required make good work and summarised the estimated costs. This gave our client a clear understanding of the risks and costs involved in the transaction, which allowed them to negotiate the company’s purchase price with clarity and confidence.
After the acquisition, our interim schedules were handed over to the client’s property managers, who used the information to manage ongoing repairs and reduce future liabilities.
If you’re considering acquiring or selling property assets in New Zealand, contact our team for expert lease reinstatement services. Call +64 9 970 7070 or email prendos@prendos.co.nz.