The Perils of Concrete – what do we do about a hard stand when ending a lease?
As a leasing practitioner, I am confronted from time to time with the vexing question of what my landlord or tenant should do about concrete hard stands when a tenancy is ending.
The person who is left to remove that hard stand area is faced with a big expense and the removal may lead to the unveiling of contamination that has been hidden.
I wish to share with you some of the issues I encounter when dealing with concrete. The issues generally fall under 3 key areas – repair, removal and contamination. Each of these areas in turn raise a number of issues!
1. So how does concrete interplay with repair obligations?
The lease will usually say a tenant cannot overload the concrete with items in excess of the load weightings of the concrete floor and hard stand areas in a premises and must repair any damage they do to the concrete.
If you are a tenant it is very important to appreciate and understand that there will be load weighting restrictions, and so do your due diligence on what the floor area can withstand – whether that be the factory and warehouse floor, yard space, or drive way and parking areas. This could be particularly problematic if your racking, concrete containers, forklifts or trucks are too heavy for the concrete hard stand. Your lease may even restrict the type of tyres your forklift can have.
At the start of a lease both landlord and tenant should record any evidence of cracking in the concrete floor surfaces. It is my experience that when a lease comes to an end, if there is evidence of cracking in the concrete, landlords and tenants will have disputes over who is responsible for that cracking. A simple condition report prepared at the start of the lease which shows the extent of the concrete cracking and an acknowledgement in the lease will assist if there is an argument down the track.
2. Who should remove the concrete hard stand?
a) The landlord leased a space to a tenant for the purposes of a service station.
b) The landlord built the service station for the tenant.
c)The lease enabled the tenant to remove their items they installed in the premises – items such as fuel pumps, cash registers, self service consoles, etc. The lease specifically stated that these items remained the property of the tenant and could be removed when the lease came to an end.
d) The tenant argued that they were not required to remove the concrete hard stand because this was a landlord fixture. The court held that the tenant was not required to remove the concrete hard stand because not only was it a landlord fixture – i.e. it was attached to the land but because an interpretation of the lease showed that they were not required to remove this.
e) The court made it clear that if the landlord wanted the tenant to remove the concrete hard stand, the lease should have been drafted to state this.
3. Should you rely on the presence of a concrete slab to hide contamination?
a) The tenant had leased a premises for a number of years to run a service station.
b) When the lease came to an end the tenant made good the premises but left the concrete hard stand on site.
c) The tenant formed the view that the concrete hard stand would prevent any contamination of the site spreading even if there was contamination underneath the concrete slab.
d) The landlord wanted to develop the site when the lease came to an end.
e) Despite the concrete slab being there, it was established that the contamination was still evident in the property and that the concrete slab would not prevent contamination. As a consequence the concrete slab needed to be removed and a full remediation of the site was required.
f) The court held that the tenant was responsible for the remediation of the site (due to contamination caused by underground storage tanks) and the fact that there was a concrete slab would not excuse the tenant from being required to make good.
The Moral to the story?
What is the moral to the story? If you are entering into a lease, whether tenant or landlord you should be very clear on the following:
a) Always be clear as to who is responsible for damage to concrete.
b) Look at the concrete load weightings to ascertain ability to withstand the load proposed and suitability for use.
c) Document the condition of the concrete slab before entering into the lease.
d) If there is any doubt or ambiguity over who is responsible for the removal of the concrete slab (particularly in cases where the tenant lays the concrete slab themselves), a lease should state who is responsible for removing the same at the end of term.
e) Don’t assume that a concrete slab will encase contamination.
Should you have any questions on any of the issues raised in this article please contact:
Andrew Grima, Principal
Phone: +61 2 9895 9271