Taking over tenant installations: The risks and realities of pallet racking compliance

Why landlords should think twice before inheriting tenant-installed racking systems in warehouses.

I recently had coffee with a client who owns a sizeable high-stud warehouse building.

His tenant of 12 years has decided to move on and offered my client their pallet racking at no charge. The initial thought was that this would be a fantastic opportunity, as it would make leasing the warehouse a very attractive, cost-saving option for a warehouse distribution company.

My comment to him was that it may not be beneficial for him to take over the racking system. Here’s why.

We need to go back to the 2011 Christchurch earthquake. The earthquake highlighted the severe negligence of many installations, systems, and materials used at the time.

Following this major earthquake new legislation was introduced to provide a safer working environment. Now, pallet racking installations require a building consent. To obtain consent, the party must show that the components and installation comply with the strict New Zealand Building Code. Floor loading specifications and an engineer's drawing form part of the information required to obtain consent. Other information, such as a fire engineer’s and emergency lighting report, is also included with the building consent application.

Many pallet racking systems installed over ten years ago no longer comply. The components are often from China, where the steel used (at the time) was a significantly lower grade than what is required today under the New Zealand Building Code. The system may not be appropriate for the user’s loads, and the floor loading may be too low.

As with any tenant improvements that a landlord may be considering taking over, it is of paramount importance to ensure they comply.

Have you ever faced challenges with tenant improvements or compliance issues? Share your experience in the comments—we’d love to hear your perspective.