In commercial real estate, the handover of properties is a critical time to learn about important matters and matters that require attention. These notes can later support the tenant or the landlord in any discussions or disputes. There is a completion and the beginning of the occupation and again at the end of the occupation.
The occupation of the tenant and the delivery of the property must be in accordance with the lease in all respects. This states that as a property or lease manager you must read and understand the rental contract. Even in a single home with many different tenants, the leases can and usually are different. The ‘make good’ clauses and the ‘delivery provisions’ of the lease are unique and must be understood per lease.
Taking photos is also part of the building documentation upon completion. It is recommended to date and time stamp the captured images in the camera and later save the images as ‘gif’ files and not as ‘jpg’. This is because ‘gif’ files have a more stable and fixed format that cannot be manipulated by software editing tools such as ‘Photoshop’. If you want the photo to be proof of something important, the ‘gif’ format is a reliable choice.
While every lease is unique, let’s lay down some rules to give you some benchmarks to work with in the transfer. You can then add a few other things that may apply to the location or property you are working on.
- Take photos in ‘gif’ format as proof of important things and presentation levels
- When taking photos, it pays to put a scale reference like a ruler in the photo
- Make notes of any comments or agreements made by parties to the rental agreement
- Check all walls and painted surfaces for damage and/or current condition, take photos where necessary to record current condition
- Check ceiling tiles and t-bars for presentation and integrity of the ceiling
- Look above ceilings for the satisfactory removal of unnecessary cabling that should have been removed
- Check all floor coverings for damage or deterioration beyond normal ‘wear and tear’
- Look for any floor or wall penetrations that are or need to be fixed, noting that any penetrations must be fire rated to local building code standards.
- Check the operation of the air-conditioning and note if an air-conditioning is required due to the furnishing or modified or installed partitions in the rented space
- Check lighting and light switches for function and safety. It may be necessary to replace all tubes in the lighting fixtures as part of the lease remediation
- Check all doors and locks for safety and security. Remember that doors and locks must comply with all building codes. All keys to the doors must be provided or returned as appropriate. If a master key system is installed in the building, check that the keys all comply with the master key system
- Check windows for function, security and safety
- Check the electricity supply to the tenant and any measurement of the energy consumed
- Verify the installation and compliance of any signage for the property and that it is in accordance with the architectural regulations established for the building.
- Look for any changes in the structural integrity of the building and property
- As part of the auditing process, it sometimes pays for the landlord’s contractors to inspect the property and provide a full report on complex or sensitive issues. This supports any subsequent legal disputes about creating good terms.
When keys are exchanged between the tenant and the landlord, or the landlord and the tenant, a receipt must be obtained as proof of the handover of the keys. The brokerage actions during the transfer to a potential tenant must also be supported with notes. It’s amazing how many disputes arise later when you least expect it; in that case, your notes are invaluable.
Never return bonds or bank guarantees to tenants until you are absolutely sure that all the proper requirements of the lease have been met. It is also important that all compensation must be made on and before the expiry of the lease; it is not something that is done after the lease expires.
Efficient make-good and delivery procedures are a crucial real estate agent skill to develop and implement in any rental situation.