Dilapidations - as a tenant, what do I need to know?

Published on: 29th April 2016

As a leaseholder of a commercial property, you will at some point be required to deal with the issue of dilapidations. Chris Eglin from our Building Consultancy department explains what dilapidations are and what as a tenant you need to know:

What are dilapidations?

Dilapidations are the difference in the condition of a property during its occupancy, or when a lease ends, compared with the condition it should have been in if maintained in accordance with the lease.

The condition that you have to maintain and return a property in will have been set out in the initial lease agreement with your landlord. If as a tenant you do not keep to this agreement, the landlord has the right to charge you for any subsequent reinstatement costs.

As a tenant, what do I need to know?

Before signing a lease agreement, make sure that you are aware of your responsibilities, regarding the repair and general maintenance of a property.

During a lease you need to bear in mind that any alterations made to a property may incur a dilapidations liability in the future, to reinstate a property to its original unaltered state.

Towards the end of a lease, it is important that you stay on top of any dilapidations work you are required to complete. If you do not complete the required dilapidations work then your landlord may issue a dilapidations claim, to recover their costs for undertaking the work required to return a property to the condition set out in the lease.

I have received a schedule of dilapidations, what should I do?

Unless you have completed all the building work set out in the lease and any work to remove alterations, you would expect to receive a schedule of dilapidations from your landlord.

A schedule of dilapidations is the document prepared by the landlord, or on his behalf by a surveyor, that lists outstanding repairs, reinstatement and decoration requirements to the property, often with an estimate of the final cost of the work.

You will be expected to respond to the schedule of dilapidations within 56 days of receiving it. Once your response has been sent, it is normal for your surveyor to meet with your landlord's surveyor in an attempt to reach a settlement figure that is agreeable for both parties.

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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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As a tenant, how can I reduce my dilapidations liability?

There are a number of ways of reducing the amount of money you have  to pay to the landlord on termination of the lease.  It can start before you have even taken on the lease.  Unless the property is new there will be parts of it that are already in disrepair.  You should look to have this disrepair recorded in a schedule of condition and write into the lease that you are not required to repair that element.  Commonly this is included in the lease as an obligation not to return the premises in any worse condition but this does not necessarily fully protect you. As a tenant you still need to ensure that it does not get any worse during the term of the tenancy. Maintain the property throughout the lease by undertaking regular maintenance; this will prevent more significant costs at the end. If possible, negotiate with the landlord for a reduced scope of your demise.  Does your demise include external windows and doors and can these be made the responsibility of the landlord?  If the carpet is already worn, can you write in that you will not have to replace the carpets on termination?  Do not attach signage to metal cladding or other sensitive surface as the damage caused by the screw holes will be expensive to repair at a later date.  When attaching anything to the building, think about how the building will be returned to its original condition when those fixings have been removed. Undertake the dilapidations work before the end of the lease.  If work can be done whilst you are still in occupation then you will not have to pay the additional loss of rent if the landlord has to undertake the work after the lease end.  By undertaking the work yourself will also give you more control over costs, you do however carry the risk that if the work is not undertaken to a satisfactory standard the landlord may claim for it to be done. 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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