In commercial real estate, handover is a critical time to become aware of important issues and matters requiring special attention. These notes can then support the tenant or the landlord in the event of a debate or dispute. There is a discount and the beginning of the occupation and again at the end of the occupation.
In all respects, the occupation of the tenant and the handing over of the premises must comply with the lease. This means that as a property or leasing manager, you must read the lease and understand it. Even in a single property with many different tenants, leases can and usually are different. The “repair” clauses and “transfer provisions” of the lease are unique and should be understood on a per tenancy basis.
The taking of photos is also part of the documentation of the premises at the time of delivery. It is recommended that the photos taken be time stamped in the camera and that the photos are then saved as “gif” files and not “jpg”. This is because ‘gif’ files are 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 rental is unique, let’s lay down a few rules to give you some guidelines to work with when transferring. You can then add other questions 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 is beneficial to put a scale reference such as a ruler in the image
- Take note of any comments or agreement from any party to the lease
- Check all walls and painted surfaces for damage and/or current condition, taking photos as needed to record current condition
- Check ceiling tiles and T-bars for ceiling presentation and integrity
- Look above ceilings for satisfactory removal of any unnecessary wiring that should have been removed
- Check all flooring for any damage or deterioration beyond normal “wear and tear”
- Locate any floor or wall penetrations that exist or need to be patched noting that all penetrations must be fire rated per local building code standards.
- Check the operation of the air conditioning and note any need for air conditioning balancing due to layout or partitions modified or installed in the rented space
- Check the operation and safety of lights and switches. It may be necessary to replace all light fixture tubes as part of the repair provisions of the lease
- Check all doors and locks for safety and security. Don’t overlook the need for doors and locks to comply with all building codes. All door keys must be provided or returned, as applicable. If a master key system is installed in the building, check that the keys are all compliant with the master system
- Check windows for function, safety and security
- Check the rental’s power supply and any metering of energy consumed
- Check the installation and compliance of all site signage and that it complies with the architectural rules set for the building.
- Look for any changes to the structural integrity of the building and premises
- As part of the verification process, it sometimes pays for owner-contractors to inspect the premises and provide a full report on any complex or sensitive issues. This will support any subsequent legal dispute regarding the terms and conditions of sale.
When keys are exchanged between tenant and landlord, or landlord and tenant, a receipt must be obtained as proof of key handover. The actions of real estate agents in handing over to any tenant must also be supported by notes. It’s surprising how many conflicts arise later, when you least expect them; in this case your notes are invaluable.
Never give a deposit or bank guarantee to tenants until you are absolutely certain that all the conditions for the execution of the lease have been satisfied. It should also be noted that all remedial work must have been carried out on and before the expiry of the lease; it’s not something that happens after the lease expires.
Effective repair and transfer procedures are an essential skill that the realtor must develop and implement in every rental situation.