End of lease – who owns what?

Oddly enough, the ownership of fixtures and fittings is quite often a very hot – and expensive – topic at the end of the lease. The fitout that cost hundreds of thousands to put in can cost plenty to remove, with many landlords wanting premises to be returned to an empty configuration. This can in particular be a problem for tenants who have taken on a lease mid term (and who do not know what condition the premises were in at the outset), and for landlords who bought the premises during the term of the lease.

The obligations of the tenant to remove fixtures and fittings and put the premises in a fit state at the end of the lease are generally called “make good” obligations. Many leases contain detailed provisions setting out the tenant’s requirements to make good. Some unfortunately do not.

Also, a lot can depend on the difference between a three letter word “may”, and the four letter word “must” as was learned by the parties in a recent Supreme Court decision centering around whether NAB – as tenant – was obliged to remove their fixtures and fittings at the end of a lease, including a strong room. in a nod to the obvious, the Court found that a provision in a lease that said that at the end of the lease the tenant may remove its fixtures and fittings meant just that, not that it had to.

The decision also dealt with concepts concerning the ownership of fixtures that have been left behind, and also chattels that have been left behind.

These sorts of arguments can be avoided if proper attention is given to the position of the make good obligations, both by landlords and tenants. It is a critical part of the leasing process and one in which care must be taken. For example, some landlords write in their leases that they have the ability to buy fixtures and fittings at a token amount, or that they can keep some things and force the tenant to remove others.

Here is a link to the decision. It is only 8 pages, and good reading https://archive.sclqld.org.au/qjudgment/2022/QSC22-073.pdf