I often think there’s a lot of baggage that comes with tenant-landlord relationships.

It is almost as if we are hard-wired to expect stereotypes; hard-nosed landlords and careless tenants. This leads to a lot of blame with parties often pointing the finger at each other if a lease goes wrong.

It stresses to me how important it is to set some very clear parameters about what a tenant expects of a landlord through the course of a lease, and in turn what a landlord expects of a tenant. It might sound very simple, but attention to detail to ensure nothing slips between the cracks is critical.

It is amazing how often we are called in to resolve a problem involving significant and costly issues that have been overlooked when tenant and landlord signed their lease.

It is important to recognise the value in a building is not simply the building itself, but how it is occupied and maintained. To keep an asset at its optimum, it is in the best interests of the landlord to keep the asset well maintained, and in turn it is in a tenant’s best interests to be very clear what is expected of them and the level of service they can expect.

A professionally researched Service Level Agreement with set timelines and measures is critical to get right, and needs to be negotiated up-front before a lease begins.

The agreement should cover items such as performance levels for the lifts and air conditioning, response time when tenants call the property manager, and quality standards for cleaning the building and car parks. The agreement will also record the penalty applicable if these standards are not met.

Clarity about operating expenses must be clearly spelt out. We have just been auditing operating expenses on behalf of a client tenant where a landlord was charging tenants $50,000 for air conditioning. We could see the figure was way too high for this building and discovered that the amount included capital works which were not the responsibility of the tenant.

Likewise the figure for cleaning was exorbitant. We suspected there was something fishy going on as tenants paid for their own cleaning in their own office spaces and toilets separately. The lease defined that the cleaning portion of the “Outgoings” budget was for the common areas and the car park. We anticipate saving our client heaps in this often-overlooked cost centre. Watch this space for more on “outgoings”!

There are aspects of a building that a tenant will frequently communicate with their landlord about; roof leaks, toilets, cleaning, lifts, car parking and air conditioning to name a few. Often it has not been spelt out what should be expected when dealing with these issues, so these become a focus of dispute and can create bad feeling between the parties.

I fully recommend that a Service Level Agreement includes quarterly meetings so parties can keep track of their agreement and are always clear about what is expected and what will be delivered.

It is after all, a two way street, and clarity and commitment to a partnership by both tenant and landlord alike helps preserve the asset, and keep costs down for both parties.

This entry was posted on Tuesday 30th September 2008 and is filed under Property Leasing. Both comments and pings are currently closed.