How Dilapidations effect tenants

Dilapidation is a term that refers to the condition of a property both during the term and at expiry of a lease, this does not mean it is only applicable for ‘run down’ properties as the name suggests. If you would like to learn how 'dilapidations' effect tenants, read on.

All commercial leases contain covenants that require tenants to maintain the property during the term, and repair and decorate the property at the end of lease. In addition to complying with statutory requirements and removing any alterations, if required by the landlord.

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. If a tenant fails to comply with the terms of the lease, they could be faced with a dilapidation liability which could be a significant bill to recover the loss incurred by the landlord as a result of those breaches. We have seen a rise in dilapidation disputes over the years, as some landlords are trying to exploit tenants, so make sure you are confident that you know what you are committing to.

What is my dilapidation liability?

It is important that tenants are aware of how dilapidations effect them and their specific dilapidations liability throughout the whole lease period, from agreeing the lease terms, through to lease end. Always check the ‘small print’ as they say, but the following points should be considered prior to accepting a lease.

1. What is the current state of the property, is this documented in the lease and what will I be held responsible for?

2. If I make any alterations, can these be easily removed at the end of the lease, without huge costs? e.g. level of reinstatement

3. What repairs and decoration fees am I agreeing to?

4. How can I reduce my liability or negotiate repairing obligations?

How to reduce your liability

Your landlord will probably instruct a surveyor to inspect the property and prepare a Terminal Schedule of Dilapidations which is a document that identifies any issues and breaches of your contract 18 month prior to lease end.

To reduce your liability, you should consider:

• Organising a planned maintenance schedule, so regular checks can identify any property repairs before they become serious e.g. leaks, roof problems. This also helps spread the cost throughout the term of the lease.

• Ask the landlord for a Schedule of Condition – this is a formal document which determines the condition of the property prior to lease, so you can make an informed decision, based on all the information of existing repairs that you may have to take on.

• Keep records of correspondence to landlords reporting disrepair.

• Ask for a professional dilapidation survey

• Find out if you can do the works cheaper than the Landlord and if this is allowed.

• What are the landlords intentions for the future of the property, where a dilapidation claim could be cut, if alterations are not required.

• Seek professional advice.

Rob Cant, Associate Director at GJS Dillon, comments, “Leases can be confusing and obviously both parties want the best deal. Be prepared to question every aspect of the lease when it comes to terms of repairs and maintenance and dilapidations, to avoid being exploited by landlords. Many tenants don’t realise that significant refurbishments or conversions that may have improved the property, could still be asked to be removed in order to revert the property back to the original pre-let state, as part of the lease agreement.”

Our building consultants have a great deal of knowledge and experience in this area and are able to provide help and guidance on all aspects of dilapidations, from interpreting a lease, to reviewing schedules of dilapidation and investigating dilapidation claims, so please contact us on 01905 676169 or email info@gjsdillon.co.uk to seek professional advice.