by Andrew Morgan - QTHB
30th September, 2019
Motel leases: Working together for longevity
Whether it’s a car, house or motel, everything falls into a state of disrepair over time if not maintained or refurbished.
Occasionally, motels that are leased experience the same; not because they are intentionally neglected, but because there may be doubt in the minds of the lessee and the lessor as to who is responsible for what. The ambiguity is generally because the lease document is not specific enough and is left open to interpretation creating problems for everyone involved.
In a perfect world, these agreements would be clear, precise and in plain English so as not to create confusion, but in many cases they are not, and neither party wants to incur any costs when they believe the other may be responsible under the terms of the lease.
Again, in a perfect world where both parties communicate, act reasonably and “give and take”, most of the repair, replacement and refurbishment issues are quickly and quietly overcome. Unfortunately, this is not Utopia, and where one or both parties are not willing to maintain their own asset, whether that is land and buildings or the business, each party ends up damaging themselves financially.
Motels are subject to higher than normal traffic, with new guests coming and going most nights, and it needs to be accepted by both the lessee and lessor that wear and tear (fair or not) is going to occur over time and that a fifty-year old motel is going to need far more TLC than newer properties - this needs to be budgeted for and accepted by both parties.
The management of this maintenance and/or refurbishment program does however, need to be considered carefully. One doesn’t need to spend millions of dollars on an older complex to make it competitive, there are many low-cost methods in which accommodation complexes can be improved in order to maximise tariff and occupancy rates.
To achieve a positive outcome there are four questions that are worth considering:
- What is the purpose of completing the job? It may be an urgent repair issue. It may be to lift the standard of the appearance/professionalism of the property. It may be a major refurbishment matter.
- What needs to be done? Does one cracked tile need to be replaced or does the entire bathroom need to be retiled? Is it a repair or renovation?
- 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 open for negotiation.
- Who will benefit most? If certain works are completed who will be the main beneficiary?
Understanding one’s lease is imperative. As with any business, know what your responsibilities are upfront and if there is any doubt as to who is responsible for a particular matter under the terms of the lease, then both parties need to discuss it fully. It may be easy to pass it off and say “seek legal advice” on the interpretation of the relevant clause within the lease but that really should be the last resort. I would say seek advice only to get an unbiased practical second opinion, besides the funds spent on legal fees when arguing over interpretation, would be far better spent on the property.
At the end of the day reinvestment back into a property (of any kind) is required by those with a vested interest. A lessee and lessor sitting down together and acting reasonably to achieve a positive result, as opposed to working against each other in these matters, is always the best way forward.