Lease Reviews: Are You Maintaining Assets That Aren’t Yours?

We were engaged to capture asset data for a healthcare client’s tenancy. The scope was to capture lessee assets only. Roughly 400 square metres of fit-out.

When we got on site the local FM looked at us like we’d lost our minds. “No, you need to capture the whole building. The landlord has handed everything over to us.”

The whole building. A four-level hospital. 4,000 square metres. That’s a 10x scope change based on information that existed in someone’s head but not on paper.

When we went back to head office to clarify, nobody could confirm what had actually changed. No formal documentation of any asset transfer. No clarity on whether “handed over” meant maintenance responsibility, capital replacement, or both.

If the chiller fails next year and needs $200,000 to replace, who’s paying?

Nobody knew.

These grey areas are more common than you might imagine. And they undermine everything that sits downstream: maintenance planning, capex forecasting, lifecycle management, compliance accountability. You can’t plan for what you don’t know you own.

How These Gaps Emerge

A lease review takes all the documentation – the original lease, the extensions, the amendments, the side letters – and consolidates it into a single obligations matrix. Who maintains what. Who replaces what. What are the make-good requirements.

Here’s how the grey areas creep in:

• Accumulation: Leases get negotiated over 10-15 years by different property managers with different incentives. You end up with extensions, COVID amendments, side letters about HVAC servicing. I’ve seen tenancy files where the “lease” was actually five separate documents that nobody had reconciled.
  
• Informal handovers: Assets transfer through verbal confirmations that never get documented. Site teams operate on “what we’ve always done” while head office works off paperwork that no longer reflects reality.
  
• Scope creep: Tenants start maintaining assets they shouldn’t because it’s easier than arguing, or stop maintaining assets they should because they assumed someone else would handle it. Years pass and nobody notices until something fails.
  
• The replacement question: A lease might say you maintain the HVAC, but does that mean you replace it when it reaches end-of-life after 20 years? Tribunals have ruled both ways depending on the wording.

What This Looks Like in Practice

When we do lease reviews for clients with multiple tenancies, we consistently find the same patterns:

• Sites maintaining assets the landlord should be handling
• Sites not maintaining assets they’re obligated to
• No baseline condition documentation from lease commencement
• Conflicting information between site teams and head office
• Replacement obligations that nobody has budgeted for because nobody knew they existed

What Happens When It Goes Wrong

Case 1: QCAT: $250,000 HVAC replacement

A landlord sought $250k from their tenant for full system replacement, arguing the lease allowed recovery of “maintenance costs.” The tribunal ruled that system replacement was capital works by definition, and ordered the landlord to refund the tenant plus interest.

Case 2: VCAT/Supreme Court: $151,009 termination mistake

A tenant terminated their lease after repeated air conditioning failures. The Supreme Court overturned VCAT’s decision, ruling that the tenant should have arranged repairs themselves and claimed reimbursement. The damages came to $151,009.

Case 3: VSBC mediation: $6,000 compressor

A bakery tenant’s compressor failed and the landlord blamed maintenance neglect. The decisive factor was that the compressor was over 20 years old – it was end-of-life, not neglect. They settled for a $6,000 rent credit.

A lease review won’t prevent equipment from failing, but it will tell you whose problem it is when it does.

The Victorian ESM Complication

If you manage assets in Victoria, there’s an additional wrinkle. VCAT’s advisory opinion on Essential Safety Measures established that if a lease pushes a landlord’s legal ESM obligations onto the tenant, that lease could be voided.

So even if your lease says you’re responsible for fire system maintenance, you might not be. And if you’ve been paying for it, you may be able to recover those costs.

The Make-Good Trap

If you move into an existing fit-out, landlords are increasingly pushing for you to take it back to base when you leave. You didn’t install it, you didn’t pay for it, but when you leave the landlord wants you to strip it out – even though the previous tenant may have already paid a make-good provision for the same work. That’s the double-dip.

This is why dilapidation reports matter. A start-of-lease dilapidation report documents the condition you inherited – the worn carpet, the aging HVAC, the scuffed walls. An end-of-lease report documents what you’re handing back. Without that baseline, you can’t prove what was already there when you moved in.

Get Ahead of It

If you’ve got multiple properties, leases signed over different periods, different jurisdictions, informal handovers that never got documented – there’s a good chance you’ve got some grey areas.

It pays to find them before something expensive breaks.

We can help you get your ducks in a row. A lease review consolidates all the documentation into a single obligations matrix. A dilapidation report establishes your baseline. And an asset register built on that foundation actually reflects reality.

Get in touch to get to the bottom of what you’re actually responsible for.