Short Answer
Do not allocate “CAPEX” broadly.
Where a tenant, operator, concessionaire or service provider invests in someone else’s premises, expenditure should be divided by the nature of the asset and its treatment on exit.
A useful split:
base-building works — structural, civil and core building-system works;
operational assets — equipment, furniture and systems used to run the business; and
fixed improvements — operator-funded works attached to, or intended to remain with, the property.
For each category, answer:
who approves → who pays → who owns → who maintains → can it be removed → who reinstates → what happens to unamortised value on early exit
The same issue arises across retail, clinics, factories and concessions.
Why This Matters
Commercial teams often reduce a works package to:
“Operator bears all CAPEX.”
But the package may include structural repairs, building-system upgrades, fixed fit-out, specialist machinery and owner-benefiting improvements.
The problem usually appears on exit.
If the agreement ends early, the parties need to know who owns permanent works, whether they can be removed, who reinstates and whether unamortised investment is reimbursed.
Those answers should exist before spending.
Typical Scenario
A property owner appoints an external operator to run part of the premises.
The operator will fund equipment and fit-out, while the site also needs structural and building-system upgrades.
The term sheet says only:
“CAPEX to be borne by Operator.”
Months later, the parties disagree over whether permanent building works were included.
Practical Analysis
01Classify the works before agreeing the budget.
Use an asset schedule instead of one CAPEX number.
Typical categories:
structure → core building systems → fixed fit-out → specialist equipment → furniture → removable operating assets
Allocate by the item’s nature and who retains its value after termination.
02If the arrangement is a lease, understand the statutory repair baseline.
Civil and Commercial Code section 547 addresses necessary and reasonable expenses incurred to preserve leased property, subject to the distinction for ordinary maintenance and minor repairs. Section 550 addresses necessary repairs during the lease, while section 553 concerns ordinary maintenance and minor repairs.
Supreme Court Judgment No. 1471/2548 distinguished major repairs from ordinary maintenance and minor repairs.
If the arrangement is not a lease, these provisions may not directly govern, but they show why “all CAPEX” is imprecise.
03Require approval before fixed works begin.
Set approval thresholds, design control and permit responsibility.
The payer should not gain unlimited alteration rights, and an investment commitment should not become an unlimited building-works obligation.
04Decide ownership when the investment is made.
For each asset, state whether ownership
remains with the operator → transfers on purchase → transfers on installation → transfers on termination
Supreme Court Judgment No. 5770/2539 considered substantial tenant-funded improvements and contractual treatment under which attached alterations became the landlord’s property.
05Build an unamortised-investment formula.
If the owner can terminate for convenience before an agreed investment is recovered, decide whether reimbursement is due.
A formula can show:
approved cost → amortisation period → start date → remaining balance → exclusions → payment trigger
Distinguish owner convenience, operator default and other exit events.
06Deal with removability and reinstatement together.
For removable equipment, state whether the operator may or must remove it.
For fixed improvements, decide whether they stay, whether compensation is payable and who restores any removal damage.
Supreme Court Judgment No. 6184/2540 illustrates the importance of consent and reinstatement obligations for alterations to leased premises.
07Separate legal ownership from accounting treatment.
Accounting depreciation does not by itself determine legal ownership or reimbursement rights.
Finance and Legal should use the same asset schedule for their separate questions.
What We Usually Look At
We review scope of works, building-system requirements, asset schedule, investment commitment, approvals, permits, ownership, maintenance, insurance, depreciation, removal, reinstatement, termination and reimbursement.
Common Traps
Typical mistakes are placing all works under “operator CAPEX,” leaving fixed-improvement ownership silent, approving only a total budget, assuming accounting depreciation creates a reimbursement right and applying the same exit treatment to owner convenience and operator default.
Practical Next Step
Build one investment matrix before works begin:
item → category → approver → payer → owner → maintenance → removable? → amortisation → exit treatment
No material work should start while ownership or exit treatment remains blank.
Legal Sources
- Civil and Commercial Code, sections 547, 550 and 553, on necessary expenses, repairs and ordinary maintenance where the arrangement is legally a lease.
- Civil and Commercial Code, sections 368 and 369, on contract interpretation and reciprocal obligations.
- Supreme Court Judgment No. 1471/2548, distinguishing major repairs from ordinary maintenance and minor repairs.
- Supreme Court Judgment No. 5770/2539, on tenant-funded improvements and contractual treatment of improvements attached to the property.
- Supreme Court Judgment No. 6184/2540, on consent and reinstatement issues arising from alterations to leased premises.
General legal information only. Please seek advice on your specific facts. Laws and regulatory practice may change.