What tenants need to know about dilapidations

Published on: 12th October 2017

Most commercial tenants will encounter dilapidations during or after a lease, as landlords look to restore their properties to the condition they were in when the lease began. Martin Smith, building consultant, explains what dilapidations are and what as a tenant you need to know.

"Tenants are often unfamiliar with the process and their responsibilities, including the reversal of alterations made to bars and restaurants, and repair and maintenance of the building itself.

"Landlords can therefore recover costs incurred to repair and reinstate the property after the lease period ends. This includes the cost of work required to remove fixtures, fittings and aesthetic touches added by tenants, which can be significant and subsequently reduce the capital tenants can spend on new ventures.

"The introduction of the new RICS dilapidations guidance in December 2016 aims to improve the way dilapidations are handled. It outlines detailed responsibilities for both tenants’ and landlords’ surveyors to make the process fairer and quicker and can therefore be useful for both parties.

"Landlords must prove any work forming part of the claim has actually been carried out. If not, a diminution valuation, under s18(1) Landlord & Tenant Act 1927, can be used to prove the loss in capital value of the property and defines the maximum value of any landlord’s claim.

"In both situations, full consideration of the cost of works and the diminution value will show any fair and tangible loss suffered and facilitate a smoother process at the end of a tenancy, for both landlords and tenants.

"Tenants should ensure they are aware of their responsibilities regarding obligations for reinstatement following alterations, together with general repair and maintenance obligations, before signing any lease agreement.

"During a lease term, liability can also be established by a chartered surveyor, who can provide advice on anticipated dilapidations liability and what limitations might apply to the landlord’s claim under s18(1)."

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Dilapidations

Dilapidations relate to both tenant’s and landlord’s obligations to repair, decorate, reinstate a property or perform legal and regulatory works during, or at the end of a lease. We develop dilapidations strategies for both landlords and tenants using our knowledge of dilapidations law and current case law. By using an expert to handle effective negotiations, you can ensure your settlement is achieved quickly and efficiently. Tenants We’ll minimise the settlement to ensure you’ve got funds for your move to a new premises, or to boost your cash flow. We also offer dilapidations advice for tenants taking a new lease, which will minimise the liability when you leave the property by providing expert knowledge applied to the building’s current condition and review with your solicitor. If needed we may also prepare a schedule of condition to attach to your lease, which will also limit your repairing obligations. Our dilapidations assessment service also provides you with a clear indication of your liability during your lease term and a clear strategy as to how to extinguish those obligations to minimise your financial outlay, during and at the end of your lease.   Landlords We’ll maximise your settlement to ensure you’ve got funds to repair, redecorate and reinstate your property and increase its capital value and desirability to new tenants. Dilapidations is an extensive field or law and is differently applied to each property, but our experts are on hand to guide you through the process, whatever the situation.   Contact Us

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What are the most commonly found items of dilapidation?

In a multi-let office building where the tenant only has an internal repairing liability, this generally comes down to replacement of worn carpets, repairing damage to ceilings and redecoration. In a single let building where the tenant is responsible for the whole of the premises then the same items as the multi-let apply but there will be equal emphasis on maintenance of the external fabric and internal building services. Air conditioning/comfort cooling is a particular problem when R22 coolant is used as it is, apart from limited special circumstances, illegal to work on these systems.  As alternative coolants are not as efficient, it is not uncommon for the systems to be removed and replaced at a very high cost. With industrial buildings the most common problems are found with the roofs.  Although asbestos/fibrous cement roofs have generally reached the end of their lives and are difficult to keep watertight, the tenant only has to keep these in repair and there is no obligation to replace with a new roof.  This is often a point of dispute as there are significant costs involved in the repair/recovering of these roofs. Profiled metal sheeting to roofs and walls are prone to cut edge corrosion.  If serious, this can render the roof irreparable and so new sheeting would have to be installed.  There are many products available to prevent this corrosion but it is important that it is addressed early.  This goes back to the “stitch in time” principal and early repair could avoid a costly claim on termination.  Ideally, such treatment should be undertaken at the time of construction but unfortunately this rarely happens. Contact Us

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A video guide to party walls

Party wall disputes can lead to stressful situations, so here’s our video guide on everything you need to know about them, and what procedures you need to follow before carrying out any work. {loadposition embed} A party wall is a wall that is shared by two buildings, which have different owners, like the wall separating you and your neighbour in a semi-detached house.

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