This short series explores how dilapidations and the responsibilities of maintaining a property are divided differently between the landlord and the tenant of a property. In this part, we explore what tenants need to know, and how they can actively work with their landlord to ensure the property is carefully maintained. You can click here to read the Landlord’s Brief Guide.
When a tenant takes a commercial lease, there will typically be obligations for repair, maintenance, and decorations during that term. These are typically known as dilapidations, and many tenants will ignore or overlook these requirements during their lease as their priority is growing and sustaining their business.
However, this can be problematic when the time comes for the lease to end. Tenants should consider the following when they are leasing commercial property:
During the term of the lease
- Always have a mind to your repairing obligations while you are still in the property and do not leave them until the end of your occupation. Addressing issues on an ongoing basis will hopefully minimise the obligation and cost at the end
- Towards the end of the lease, your landlord is likely to commission a dilapidations surveyor to prepare a detailed schedule setting out the areas where they believe you need to meet your lease obligations
- Initially this will be served on you and, if you have time before you vacate, this is an opportunity for you to carry out those works or, and this is advisable, instruct your own dilapidations surveyor to assess the merit of the claim in line with the terms of the lease
- A lot of landlord’s claims are exaggerated. Just because the landlord’s surveyor says something needs to be done, that does not mean it does. Seek advice at an early stage on what you need to do
Once the lease has ended
- When you leave the premises, the landlord will re-assess the property and may amend its claim. At this stage, it is likely that the claim will include an overall figure (broken down into stages) for the cost of dealing with the dilapidations
- Again, do not take the figure as gospel as it is likely to be over-inflated and your own expert should be able to advise you on what is a reasonable figure or not. The claim is likely to include a claim for loss of rent and professional fees (the latter being a cost that the lease will normally require you to pay)
- The dilapidations schedule will normally be served under the protocol set out by the Property Lawyers’ Association and endorsed by the courts. This should be served within a reasonable period of time (normally 56 days) after the lease has ended. It is advisable to ensure that you follow the protocol as closely as possible
- The protocol will require you and your surveyor to respond in full within 56 days of receipt of the schedule, and if agreement is not reached you will enter into a constructive dialogue with the landlord and its surveyor to try and reach agreement
Your available defences
There are various defences to dilapidations claims (known as section 18 defences) which are worth noting:
- The cost of the works is not necessarily the amount of the landlord’s loss.
The loss should be calculated by reference to the loss in value of the property with and without the works being done. So, if the cost of the works is £100,000 but the value of the property without the works being done is £250,000 and with the works carried out is £300,000, it is arguable that the loss and genuine claim is only £50,000.
- The landlord intends to redevelop or demolish the property.
If the landlord intends to redevelop or demolish the property and has no intention of carrying out the works it is claiming for then it is arguable that there is no claim at all.
How we can help
Negotiation is usually able to resolve any discrepancies or disagreements between landlords and tenants in dilapidation cases, but in some situations an agreement is not reached. This may force the matter to go to court, mediation, or a form of expert determination. Here at Gregg Latchams, we have experience in all three of these areas, and are happy to assist with your situation.
Any conversation about dilapidations is typically technical and complex, and professional advice from the beginning can greatly support your cause. However, if you are currently in the process of negotiating a dilapidations case and need support, we will happy to discuss the situation with you and provide advice.
Please contact Richard Gore to discuss your situation further.