Fit-outs - who pays?

Lady sanding a wooden chair

It’s important that you understand all of the expenses you will have to pay to get your shop ready to trade. You and the landlord should negotiate these preparation costs and agree to them in writing so that both of you are clear on the responsibilities each has agreed to before signing the lease.

The tenant is usually responsible for the costs of installing fixtures and fittings in their shop – this is called the fit-out.

The fit-out can be a big expense for the tenant and can take some time to complete. During the fit-out, while the shop isn’t trading, make sure you can afford to pay the rent, or try to negotiate a rent-free period.

The tenant may also be responsible for some or all of the landlord’s costs of preparing the shop for your fit-out, known as landlord’s works. The landlord’s disclosure statement must state whether you pay these costs. You must agree, in writing, to the maximum cost of landlord’s works before beginning the lease.

The tenant does not have to pay any more for the landlord’s works than the maximum which has been agreed to in writing.

Shopping centres

In shopping centres, there is usually a standard of construction required for fit-outs. Information on the fit-out standard must be included in a tenancy fit-out statement or guide.

The statement or guide may accompany the lessor’s disclosure statement; or it may accompany or be included in the lease or any agreement related to the lease of the shop.

The statement or guide will help you to understand whether you can afford the fit-out standard required in the shopping centre.

The tenant does not have to carry out any fit-out work that is not included in the statement or guide.

At the end of the lease

Your lease may have an option to renew the term of the lease. Options to renew will often make it clear that the landlord may require further fit-out works, but will not contribute to the cost of refitting the premises.

Check the option carefully for these details because it might help you to decide whether to exercise the option and whether you will need to do additional fit-out works to the shop.

If your lease includes a clause requiring you to refurbish or refit the shop, it must have enough detail to indicate the general nature, extent and timing of the required refurbishment or refitting. If there isn’t sufficient detail, the clause does not apply.

The tenant is likely to bear the cost of removing the fit-out at the end of the lease.