Commercial Property Dilapidations

Leases of business property generally contain clauses requiring the tenant to keep the property in good repair, and outlining the tenant’s obligation both during and at the end of the lease. The term ‘dilapidations’ refers to breaches of the repair clauses in the lease. These beaches can arise during the lease term but more commonly are dealt with at the end of the lease. This is sometimes known as ‘terminal dilapidations.’

When disputes arise, it’s usually because the parties cannot agree what repairs should be done and who is responsible for them. Often, the landlord believes that the tenant has not done enough to make good any disrepair, while the tenant believes he is being asked to do too much.

Generally, a landlord or his surveyors will inspect the property at the end of the lease and serve a ‘schedule of dilapidations’ on the tenant. This is a document that lists all the disrepair that need to be made good by the tenant, and any alterations that need to be removed.

If the tenant refuses to make the repairs or pay for the cost of having those works carried out, or if the tenant disputes the schedule, then the landlord may need to take legal action to claim damages. Where the court rules in favour of the landlord, the tenant may be liable to pay:

• The cost of the repairs
• Landlord’s professional fees
• Court costs
• In some circumstances, damages to the landlord arising from any decrease to the value of the property as a result of the tenant’s actions and any loss of rent.

From the tenant’s perspective, it is often in your best interests to negotiate the schedule of dilapidations rather than end up in court. A specialist commercial property dilapidations solicitor with a proven track record can advise on the legal and valuation issues that surround dilapidation claims, and save you a lot of time and money when negotiating the claim’s value.

The Dilapidations Protocol established by the Property Litigation Association sets out a framework for landlords and tenants to follow in dilapidations disputes. There are strict processes and time limits to follow which are designed to encourage an early and amicable settlement of disputes without going to court.

While each claim is different, each party will usually hire a solicitor and specialist surveyor to negotiate the claim. Actions might include:

• Checking the lease and see what each person’s rights and responsibilities are
• Determining what is recoverable in terms of costs and damages
• Preparing and serving a schedule of dilapidations
• Estimating the costs involved in putting the issues right
• Negotiating a settlement, with a sum of money being agreed upon to cover the cost of making good the dilapidations
• Pursuing alternative forms of dispute resolution before taking the matter to court.

This is a technical area of law and the stakes are high. Prevention is better than cure and good legal advice before you enter into a lease is essential, for both the landlord and tenant. Using clear and precise language in the lease will remove ambiguity over what each party’s repair obligations are and remove any misunderstandings at the end of the lease.

Having a ‘schedule of condition’ drawn up front can also minimise the likelihood of any disputes. This detailed photographic report is carried out by a surveyor and shows exactly what condition the property is in at the start of the lease, so the tenant’s liability for pre-existing problems is limited.

At Osbornes, our property dispute lawyers have a proven track record in dilapidations claims. We offer a bespoke service and can work with landlords or tenants, whatever the size of your property or business. We can guide you through the options and the best steps to take to resolve matters quickly with minimal stress.

This is one area of law where swift and proactive action can put you in a better position. It is recommended you speak to a solicitor within the last 6 to 12 months of the lease to start the negotiation process. For landlords, early advice from an expert solicitor can ensure a favourable outcome and minimise the possibility of a delay in re-leasing the property. For tenants, carrying out repair works before the lease ends will generally achieve a much better settlement than leaving the property in a state of disrepair.

For more information, please contact Osbornes’ commercial property dilapidations specialists today.