Published in Cambridge Independent, Commercial Property, February 13, 2019
Every commercial lease contains important clauses about repairing obligations or “dilapidations” – but in the excitement of sorting out new premises, the detail and importance of these words can easily be overlooked. We are often surprised at how few tenants read the small-print?
Typical leases contain obligations for the tenant to remove alterations and reinstate the property back to its original condition. That of course seems fair, but the reality of undertaking repairs and redecorations is always hard to imagine when your mind is on “moving in” rather than “moving out”!
When it does come to leaving, it is not uncommon for previously great relationships between landlord and tenant to disintegrate, when opinions differ about what the “original state” was, what is “fair wear and tear” and when an “improvement” is viewed as an unwelcome alteration.
So, the moral of the tale, for both landlord and tenant is don’t brush over the detail of dilapidations. Before the contract is signed, discuss, agree and record your mutual expectations. Ths is a complex area of landlord and tenant law and the best time to plan for the end of the commercial lease, is right at the outset. This is where you can ensure that the commitments agreed are reasonable and unambiguous and both parties can plan to minimise any impact and avoid unbudgeted maintenance and legal costs.
Useful Facts:
- Failure to honour dilapidation obligations represent a breach in the lease and can result in tenants being served substantial claims for damages after they have moved on.
- Landlords can make claims for loss of rent and other consequential losses incurred in carrying out legitimate works which the tenant has failed to action.
- Claims, made by landlords, need to be substantiated and may not always be upheld. This can result in lengthy negotiations and legal costs.
- As with all aspects of a contract, the dilapidations obligation should be fair and reasonable. Realistic lease terms can be reviewed before a contract is agreed, in the interest of both parties.
Expert advice is available and is recommended for both tenants and landlords. Whether this is required before a lease is agreed, when notice is served, or when considering making a move to new premises. There are professional companies like Doyen Land who can record the condition of a property at the outset, assess dilapidations works required during or at the end of a lease, and negotiate a fair outcome for both parties.
Don’t let dilapidations become a problem … face the reality and plan for the future.
Doyen Land is a Property Advisory service with 30 years’ experience in commercial property and development consultancy. We are members of the Royal Institution of Chartered Surveyors (RICS) and our clients benefit from expert professional advice and support.
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