Who pays for tenant improvements?

When leasing commercial spaces, business owners will need to make tenant improvements every so often. These are renovations on the interior structure of the unit to make it more useful. To avoid future disputes between the landlord and the tenant, a good tenancy agreement should specify who is expected to shoulder the cost of such improvements.

It is important to keep in mind that tenancy laws and rules are different in every place. Here, the Auckland District Law Society (ADLS) guides the local tenancy agreements.

Commercial Tenancy: What are the rights of tenants?

Based on the ADLS commercial deed of lease, both tenants and landlords have rights and obligations.

Rights of Tenants

In exchange for rent, the tenants have the following rights:

Access to the commercial space that is in a safe and good condition

A reasonable level of privacy

Protection from unfair rent

Protection from sudden eviction

Right against discrimination

Keep in mind that aside from rent, tenants are responsible for other expenses called outgoings.

Obligations of Landlords

The law also specifies the duties of the property owner. 

For instance, it is the landlords' responsibility to make sure that the commercial space is safe and in good condition. By safe, this means that the structure complies with all local building requirements. This also includes compliance with health and safety protocols mandated by the government. 

In addition, it is the responsibility of the landlord to maintain the building and its outside premises, including the car parks. Hence, there must be regular inspections and maintenance of the structure and facilities.

Who pays for improvements made to the property?

It depends on the agreement. In general, it is the duty of the tenants to pay for improvements to the rental space. For example, the tenant should pay for the cost of painting and decorating the interior premises.

However, it is always a great idea to ask your landlord about an improvement allowance. Depending on the agreement, this will save tenants a lot of money. 

What happens to the rent if the landlord initiated the improvements?

According to the ADLS Deed of Lease, if the improvements or alterations made by the landlord are required by law, then a portion of the cost can be legally passed on to the tenants. The additional amount that can be charged by the landlord is called an improvements rent percentage. 

Let Airpropty handle your tenancy needs

Whether you are a landlord or a tenant, Airpropty can be of service to you. As property management specialists, let us manage your tenancy for you. Let us do what we do best, so you can focus on what you do best.