Commercial Condition Reports: Protecting Landlords and Tenants at Lease Commencement
When a commercial lease begins, the condition of the property at that point in time becomes very important.
Commercial leases commonly run five to fifteen years, sometimes longer when renewal options are exercised. Over that time, it can become difficult to remember exactly what the property looked like when the tenant first took possession.
A Commercial Condition Report creates a clear record of the property’s condition at the start of the lease so both the landlord and tenant have an agreed reference point for the future.
What is a Commercial Condition Report?
A Commercial Condition Report is an independent record of a property’s condition at lease commencement.
The report documents the state of the property through:
written descriptions of condition
structured inspection notes
high-resolution photographs
documentation of internal and external areas
This creates a baseline record that can be referred to at the end of the lease when questions arise about damage, alterations, or reinstatement obligations.
Commercial Condition Reports are sometimes also referred to as:
Dilapidation Reports
Tenancy Condition Reports
Lease Commencement Reports
Are Commercial Condition Reports a Legal Requirement?
In most cases, Commercial Condition Reports are not legally required.
However, they are widely considered industry best practice because they provide an independent record of the property’s condition before the tenant takes possession.
Without a baseline report, disputes can arise years later when it becomes unclear whether damage or defects existed before the tenancy began.
Why Independent Reports Are Important
Some property managers prepare condition reports internally, particularly for smaller tenancies.
However, many landlords and tenants prefer an independent inspection provider.
An independent report helps ensure the documentation is objective and unbiased, providing a fair record for both parties.
Because the inspection is carried out by a third party with no involvement in the lease negotiation, the report becomes neutral evidence of the property’s condition at the start of the tenancy.
This approach can significantly reduce disputes when the lease ends.
Commercial Properties Vary Greatly in Size
Commercial condition reports can vary significantly depending on the type of property being inspected.
Some inspections involve small office suites or retail tenancies, while others may include much larger assets such as:
warehouses
distribution centres
medical facilities
industrial buildings
large office complexes
Larger properties often include extensive external areas such as car parks, hardstands, loading zones and fence lines, which also need to be documented.
At R24, our team prepares reports for properties ranging from small offices through to large industrial and commercial assets across Australia.
What Happens If No Ingoing Condition Report Is Prepared?
If no report is completed at lease commencement, the property’s condition may only be recorded at the end of the tenancy.
Because there is no earlier baseline, it can be difficult to determine what changes occurred during the lease.
For this reason, most commercial property managers recommend completing a condition report before the tenant takes possession.
When Should the Inspection Be Completed?
Ideally, the inspection should take place immediately before the tenant takes possession of the property.
This ensures the report reflects the property’s condition at the exact point the lease begins.
How Much Does a Commercial Condition Report Cost?
Costs vary depending on the size and complexity of the property.
For smaller office tenancies, condition reports are typically relatively straightforward, while larger industrial or multi-tenancy properties require more extensive inspections.
Typical pricing for office tenancies is shown below.
Property Size | Ingoing Condition Report
≤100m² | $200
200m² | $250
300m² | $300
400m² | $350
500m² | $400
600m² | $450
700m² | $500
800m² | $550
900m² | $600
>1000m² | On Quote
Pricing is exclusive of GST.
If an ingoing report is available, an outgoing inspection can be completed as a comparison inspection.
Who Pays for the Condition Report?
In Western Australia, the cost of an ingoing Commercial Condition Report is commonly paid by the tenant as part of the lease commencement process.
However, the exact arrangement can vary depending on the lease agreement and the property manager’s procedures.
Why Many Commercial Agencies Use Independent Providers
Many commercial agencies prefer using independent inspection providers because it ensures the documentation is:
consistent
professionally prepared
supported by clear photographic evidence
Independent reports can also help reduce disputes between landlords and tenants by providing a clear and factual record of the property's condition at the start of the lease.
About R24
R24 provides Commercial Condition Reports for properties of all sizes across Australia.
Our team completes over 20,000 property inspections each year, including offices, retail tenancies, warehouses, medical centres and large industrial assets.
Reports are delivered within 1–2 business days, with structured documentation and high-resolution photographic records to ensure the property’s condition is clearly documented at lease commencement.