where improvements) carried out by the tenant during the term of the lease (or
in contemplation of it) are removed at the end of the term and the premises are,
more or less, stripped back to a shell and core condition.
From a landlord’s point of view this is not unreasonable as most incoming tenants
(whether oce, retail or restaurant) to whom the landlord may let the premises
after the tenant has departed, will have their own tting out requirements and
will want to carry out works to the premises to ensure that they are suitable for
their own needs. For that purpose, any incoming tenant would obviously want
any previous tenant’s t-out to be removed. Landlords can usually charge a higher
rent, or pay lower capital contributions, if they are able to hand over the premises
to an incoming tenant in a shell and core condition, ready to be tted out. It is
on that basis that landlords usually insist that a tenant removes his t-out at the
end the term.
However, from a tenant’s point of view this is likely to be costly in two ways. First,
there is the physical cost of having to strip out any tting out works, make good
any damage caused and freshly decorate the premises, and secondly there is the
cost both in terms of the actual time that this could take and in terms of loss of
use of the premises or, in the case of retail and restaurant premises, loss of trade.
For that reason, tenants are keen to resist the requirement to remove their
alterations and reinstate the premises at the end of the term. A common
tenant requirement, therefore, is that they need not remove their tting out
works but simply remove loose items, contents and, in the case of retail premises,
shelving. However, this is often the subject of negotiation and usually comes
down to bargaining position.
A common compromise if the landlord will not agree that the tenant is not
obliged to strip out his tting out works is that the tenant will not be obliged
to remove any mezzanine oor it has installed, any amenity block (toilets), any
air conditioning equipment and apparatus with more than 5 years’ useful life
remaining (these items often become obsolete quickly), together with any other
specic and substantial items which are likely to benet the premises and which
a future tenant is unlikely to require are removed. Obviously any such large items
that a tenant is not obliged to remove could save the tenant a great deal of money.
On an associated point, however, a tenant should ensure that the lease expressly
provides that any t-out, alterations or other works carried out and anything
A Tenant’s Practical Guide to Commercial Leases | Page 79