Insurance Insights

When landlords and tenants disagree over ‘reasonable wear and tear’ in commercial leases

commercial lease

July 5, 2017

In disputes between landlords and tenants at the termination of leases, one frequent cause is the condition of the leased property. Typically, the lease agreement will require tenants to maintain the property so that it is left in the same condition as at the beginning of the lease.

While there will be variations between the contracts depending on the purpose of the property, most tenants will seek to include a ‘reasonable wear and tear’ exception.

In cases where the landlord and tenant disagree over whether the condition of the property at the end of the lease is beyond reasonable wear and tear, and the landlord wishes to bring the issue to court:

  • The landlord must first provide evidence that the property was left in worse condition by the tenant than at the beginning of the lease. At that point, the tenant must then show that the difference is within the boundaries of reasonable wear and tear according to the contract.
  • The courts will take a number of factors into consideration when determining what can be deemed reasonable, including the purpose of the property and operations being conducted, building age and length of lease.
  • If the court finds in favour of the landlord, the tenant is then required to pay the landlord the cost to repair the property to the same condition as at the beginning of the lease. The landlord can collect this amount even without any intention to use the funds towards the restoration.  

To avoid the potential conflict, it is important that tenants are on the same page as their landlords on what is being expected of them for maintaining the condition of the property. To ensure proper records and evidence is collected, landlords and tenants can conduct inspections together both at the beginning and end of the lease.

For information and resources on insurance and risk management, please contact us.

Source: “Negotiating a Tenant’s Restoration Obligations: A Reminder on Reasonable Wear and Tear Exceptions in B.C.” by Chad Travis and Jada Tellier at Lawson Lundell LLP (May 29, 2017).

Get an Insurance Quote Today!