Repair, replace, refurbish but who is responsible?
A recurring issue that affects many motel owners who own a leasehold motel business or one that is leased to an operator arises when repairs, replacements or refurbishments are required to be completed.
The question continues to be asked, “who is responsible?” Motels that are leased and fall into a state of disrepair often do so because there is doubt in the minds of the lessee and the lessor as to who is responsible for what.
Neither party is then eager to incur the costs when they believe the other may be responsible under the terms of the lease. Often a lease document will either not be clear on who is responsible for exactly what, or more often the interpretation by either party may be ambiguous and lead to more questions than answers as a result.
In many cases where both parties can act reasonably and “give and take” is accepted by both, then many of these repair/replace/refurbish issues are often overcome.
Where one or both parties are not willing to maintain their own asset whether that is land and buildings or the business, each party is ultimately damaging themselves financially. It must be accepted by a lessee and lessor that wear and tear (fair or not) is going to occur over time and that a forty-year old motel is going to need more ongoing repair, replacement and refurbishment than a five-year-old motel.
Each night there are guests coming and going and properties do get knocked around by occupation. Ageing motels do require more TLC than newer properties and this needs to be budgeted for and accepted by both lessee and lessor. It must also be considered that one cannot “turn a sow’s ear into a silk purse”. Therefore management of a refurbishment program needs to be considered carefully.
A 40 year old motel may never be able to compete with a brand new high standard complex no matter how much money is thrown at it. Millions of dollars do not need to be spent on an older complex to make it competitive. There are many low cost methods in which an accommodation complex can be improved in order to retain guests and tariff rates.
Over recent years where new accommodation complexes have been built in many areas of Queensland this has in some ways resulted in the question at hand becoming more and more common. Especially when room rates are slashed in order to try and build up a client base in the early months.
Many long established motels then look to be upgraded through repairs, replacements and refurbishments in order to remain competitive and improve the standard of the product that is being offered to the market.
Three questions come to mind regarding the who is responsible issue:
What is the purpose of completing the job? – It may be an urgent repair issue, or is it to lift the standard of the appearance/professionalism of the property, or is it a major refurbishment matter.
What needs to be done? – Does one cracked tile need to be replaced or does the entire bathroom of tiles need to be replaced in order to bring the look of the bathroom into the modern era.
Who is responsible for the cost? – Under the terms of the lease who is responsible for the cost? Is it clearly defined within the lease or is it ambiguous and open for interpretation.
If a lessee or lessor has any doubt as to who is responsible for a particular job to be completed under the terms of the lease, then they need to seek advice on the interpretation of the relevant clause within the lease. The opportunity to understand exactly who is responsible for what is available when one enters a lease agreement and this is the time to make sure one is aware of their repair, replacement and refurbishment responsibilities.
If there is doubt over the interpretation of such a clause within a new motel lease then perhaps the clause needs to be made clearer from the outset. Although this is not often done, if it is a lease already in place, perhaps it can be mutually agreed to amend the lease reflect a more definitive answer to that question of “who is responsible?” This may not be practical however if the issue is already an issue!
At the end of the day reinvestment back into a property (of any kind) is required by those with a vested interest. Sitting down together to work a suitable plan to act reasonably and rectify is always going the best option.
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