Landlord Guide to Dilapidations for Tenants

Tenant Guide to Dilapidations

When should I consider Dilapidations and the risks to me?

points to consider

How can Carter Jonas help you?

What are ‘Dilapidations’ and why are they important to me?

Before signing a lease, it is important that you consider the following 6 key questions:.

It is important that tenants are aware of their dilapidations liability throughout the lease process from agreeing the lease terms, through to lease end. We have summarised the key stages as follows:

When should I consider Dilapidations and the risks to me?

What are ‘Dilapidations’ and why are they important to me?

Dilapidations is a term that refers to the condition of a property both during the term at expiry of a lease.

Condition – What is the current condition of the property? Is it in a good state of repair?

Demise – What is the extent of the property that I am taking responsibility for, and is that clearly defined in the lease?

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For further information, please contact one of our experienced building consultants

Richard Love

Head of Building Consultancy

07780 667010

EMAIL ME

07879 430793

Bristol

Tom Lowe

EMAIL ME

07831 628737

Cambridge

Keith Fuller

EMAIL ME

07887 834071

Oxford

Richard Harris

EMAIL ME

07801 666128

London

Matthew Reading

EMAIL ME

07795 047456

Leeds

David Robinson

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Image of a room in a state of disrepair. There are wooden floorboards and beams, as well as arched windows lining the brick walls.

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All commercial leases contain covenants that require tenants to repair and decorate the property, in addition to complying with statutory requirements and removing any alterations, if required by the landlord.

If a tenant fails to comply with the terms of the lease, they could be faced with a significant bill to recover the loss incurred by the landlord as a result of those breaches.

Prior to lease

Repairing Obligations – What are repair and redecoration terms have I agreed to?

Reinstatement Obligations – What level of reinstatement have I agreed to?

Alterations – Will the alterations I want to make be easy to remove at term end?

Mitigating Liability – Can I reduce my liability by recording the condition of the property in a schedule of condition or renegotiating the repairing obligations?

It is important to ensure that the lease you are signing is appropriate for your circumstances. If you agree to overly onerous terms, you may find yourself with a significant dilapidations liability at term end.

All leases contain obligations for the tenant to maintain the property during the term. It is important to understand these obligations and consider the benefits of maintaining the property throughout your lease and the risks of letting it run into disrepair

During the term

Benefits

Risks

• Property is maintained and presents well for your business

• Reduce the risk of business interruption through damage caused by leaks

• Reduce the repairing liability at term end

• Completing repairs early can prevent them leading to significant repairs in the future

• If you fail to complete the maintain the property, the landlord could enforce the lease terms and request that you complete the works via a schedule of dilapidations during the term

• If those works aren’t completed the landlord could enter the property and complete the works themselves and recover the costs from you as a debt

• At the end of the term you could be faced with a large bill to repair a property that you won’t benefit from going forward

At lease end you will be responsible for ensuring that you have complied with the terms of the lease. Usually this will include the repair and decoration of the premises, reinstatement of alterations and compliance with statutory requirements.

Lease End

Usually, a landlord will instruct a Surveyor to inspect the property and prepare a Terminal Schedule of Dilapidations identifying the breaches and remedy required.

To minimise your liability, you should consider:

• Have I maintained the property throughout the term, or will I need to complete repairs now?

• What alterations have I made to the property, and do I need to remove them?

• How long will it take me to complete this work?

• Can I do these works cheaper than the Landlord?

• What are the Landlords intentions for the property?

Points to Consider

Statutory Obligations

A schedule of condition can help to record the condition of the property at a point in time. If your property is in disrepair prior to commencement of the lease, you could append a schedule of condition to reduce your repairing liability.

Consequential Losses

Landlords Fees

Break Clause

Statutory Cap on Damages

Every commercial lease will require you to comply with statutory regulations throughout the term. You should ensure that you understand those obligations and how they may change during the lease term.

Schedule of Condition

Most commercial leases make provision for recovery of consequential losses by the landlord. For example, if the landlord cannot let the premises after you vacate, they may be able to recover the lost rent, void rates, and service charge that they would have received over the period it takes to complete the works.

Most commercial leases make provision to recover the cost of fees for the preparation and service of the dilapidations schedule from the tenants.

When activating a break clause, you must ensure that you do not breach the terms of your repairing or reinstatement obligations as this could invalidate the break.

When presented with a significant claim for repairs you should seek professional advice on the potential for a statutory cap on damages.

Understand your repairing liability before signing the lease

How can Carter Jonas help you?

Carter Jonas has a team of Building Surveyors who are experienced in preparing and negotiating Schedules of Dilapidations on behalf of tenants. In the last year we have represented X no of tenants across the UK and reduced their dilapidations claim by an average of £X/sqft (or we could summarise the total figure we have saved tenants).

Our surveyors can provide advice at all stages of your lease with one of the following services:

Pre-lease

• Advise on the requirements of lease terms and dilapidations liability

• Condition Survey to highlight any unforeseen defects/ repair issues

• Schedule of Condition – Record the existing condition

• Undertake Dilapidations Liability Assessment

• Prepare Preventative Maintenance Schedules

• Manage maintenance works

During the Term

• Specify, procure and manage works

• Negotiate Schedule of Dilapidation

Term End

Top Ten Tips

Clearly define the extent of the demised premises within the lease

Ascertain the condition of the property prior to agreeing lease terms

Keep property in good repair during the term

Keep records of correspondence to Landlords reporting disrepair

Proactively assess your liability prior to lease end

Maintain open dialogue with Landlord throughout lease

Understand strict conditions of a break clause

Understand what constitutes an appropriate repair

Obtain professional advice at all stages of the process

Most commercial leases make provision to recover the cost of fees for the preparation and service of the dilapidations schedule from the tenants.

When activating a break clause, you must ensure that you do not breach the terms of your repairing or reinstatement obligations as this could invalidate the break.

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