The Motel Lease – The Landlord’s Obligations

By David Burrough

Whilst the obligations of the landlord under a motel lease are not as numerous of those of the tenant they are of equal importance.

Generally a landlord will be required to:

1.       Allow the tenant quiet enjoyment of the Motel.  This means that the tenant is entitled to occupy the Motel peaceably and without interruption or disturbance from the landlord or the landlord’s agents.  A tenant is entitled to exclusive possession and as such is entitled to exclude all others, including the landlord.

2.       Ensure that the services are made available and continue to the Motel.  The term services is usually defined in a Motel Lease to mean the services running through or servicing the Motel and will include services such as: power, water, gas, sewerage, drainage, the fire sprinkler and fire protection systems, alarm systems, automatic opening and closing door systems, lifts and elevators, telecommunications, piped music and any public address system.

3.       Finally a landlord should also be required to purchase the tenant’s property at the end of the Lease.  The Motel Lease should be clear in relation to how this is to be achieved. And should address the following issues:

(a)     Purchase Price:  Usually the purchase price of the tenant’s property will be that value as agreed on by the landlord and the tenant.  If a purchase price can not be agreed then it should be determined by a valuer and the costs of the valuation should be paid equally by the landlord and the tenant.

(b)     Qualifications of any Valuer:  Usually the Motel Lease will specify that any valuer appointed to value the tenant’s property must:

(i)      be a member of the Australian Institute of Valuers;  and

(ii)     have a minimum of 5 years experience in valuing similar property;  and

(iii)     value the Tenant’s Property on their existing use in situ in the Motel and as a going concern.

(c)     Deduction to be made from the Purchase Price:  The landlord should be entitled to deduct from the amount to be paid to the tenant the following amounts:

(i)      any amount payable by the Tenant under the Lease which is unpaid;  and

(ii)     all reasonable costs and expenses incurred by the Landlord as a result of the Tenant’s default.

(d)     Transfer of Ownership:  The ownership of the tenant’s property should not pass to the landlord until the purchase price has been paid to the tenant.

The above obligations are important to consider when negotiating the terms of a new Motel Lease and are important from both the landlord’s and the tenant’s point of view.  From the tenant’s point of view the tenant’s property has the most value when sold to the landlord as a going concern.  From the landlord’s point of view, the landlord does not want a tenant stripping the motel and removing all of their property at the end of the lease.  Purchasing the tenant’s property is the most cost effective way for the landlord to fit-out the motel to allow the landlord to run the motel himself or to sell the business to a new tenant.