Of all the clauses in a commercial lease, restoration is the one most often skimmed at signing and most often disputed at expiry. It is also among the easiest to fix in advance.
What it says
A typical restoration clause requires the tenant, at the end of the term, to remove its improvements, fixtures and alterations and return the premises to base building condition, repairing any damage caused by the removal.
Read literally, that can oblige a tenant to demolish a build-out the landlord paid for through an improvement allowance, and to do so at its own cost, under time pressure, while also moving a business.
Why it exists
It is not unreasonable in principle. A landlord re-letting a space does not want to inherit a previous tenant’s internal staircase, walk-in cooler, vault, laboratory casework or server room. Specialised improvements can genuinely reduce a space’s appeal and cost money to remove.
The problem is that the clause as usually drafted does not distinguish between a walk-in cooler and a set of ordinary partition walls.
The fix, at the offer stage
Ask for this: the landlord will identify, at the time it approves the tenant’s drawings, which specific elements must be removed at the end of the term, and will waive restoration for everything else.
That single provision converts an open-ended future liability into a known list. Landlords generally accept it, because it gives them exactly the protection they actually wanted — control over specialised installations — without an unquantified obligation hanging over the tenant.
Related terms to settle at the same time
- Fixtures versus improvements. Trade fixtures the tenant installed and can remove without damage usually remain the tenant’s property. Leasehold improvements usually become the landlord’s. Say which is which.
- Condition on return. “Base building condition” should be defined by reference to a plan or specification, not left as a phrase. Normal wear and tear should be excepted.
- Holdover. If restoration work runs past expiry, holdover rent — often 150 to 200 per cent of the last month’s rent — starts running. Understand the rate and the notice.
- Signage. Removal and making good, including the building fascia and any pylon.
If you are already in a lease
Two things are worth doing now rather than in the final month. First, find the clause and read it, so you know what you have agreed to. Second, pull the approval correspondence from the original fit-out — if the landlord approved the drawings without reserving a removal requirement, that history is useful.
Then build the estimated cost into your budget for the final year, and raise it at the next renewal negotiation, where you have leverage. A landlord who wants you to stay is generally willing to narrow a restoration obligation.
This article is general information, not legal advice. Have a commercial real estate lawyer review your lease.
Talk it through with Rimrock
Rimrock Sales & Leasing works with owners, investors and tenants across Calgary, Edmonton and Lethbridge. Get in touch or call 403-910-4611.