Dilapidation Contractors Blog

Dilapidation liability can be a factor of conflict between tenants and landlords. At the end of the lease term, landlords might accuse the tenant of leaving the property in disrepair. It could become an issue of conflict between landlords and tenants. If you are a tenant or planning to rent a commercial property, you should read the following to reduce your dilapidation claim. This article will discuss how a tenant can reduce his dilapidation liability. If you follow the steps provided in the following discussion, you can maintain a conflict-free relationship with your landlord.

Conduct a survey of the property at the start of the lease term

As a tenant, you should understand that your actions before, during, and at the end of the lease term significantly impact dilapidation liability. Our first advice is to hire a professional dilapidation surveyor to survey the property. The Royal Institution of Chartered Surveyors (RICS) determines rules and regulations for property surveys, and the professional surveyor must follow RICS guidelines to conduct the study. The surveyor can determine the actual condition of the property you are about to lease or have recently occupied.

Prepare a schedule of condition (SoC)

Once the surveyor completes surveying the property, he should present you with a Schedule of Condition (SoC). It can be considered a valuable and legal document to understand the condition of the properties at which you have taken the property on lease. SoC is a useful document that can help you reduce your dilapidation liability. It can be used as proof of property condition at the start of the lease term. As a tenant, you may be responsible for repairing the property for the damages you caused, but you are not liable to repair damages caused before your possession. The SoC is an essential tool for reducing excessive dilatation liability. As the saying goes, a stitch in time saves nine, and you can save thousands of pounds later by spending a few pounds conducting a property survey and preparing an SoC.

Continuously maintain the property during the lease term.

Constantly maintaining the rented property is crucial to reducing dilapidation liability. You should clearly understand your responsibility to maintain the property at the start of the lease term. Based on your understanding of the clause, keeping the property 'in repair' is essential. If your landlord decides to have a professional surveyor conduct an interim dilapidation survey, your dilapidation liability will not be much as you have kept it 'in repair.' Continuous maintenance of the property will not only help you reduce dilapidation liability but also improve your image as a good tenant. It will also reduce the chance of conflict between you, as a tenant, and the landlord.

Reinstate the property at previous conditions.

Reinstating the property in its previous condition is crucial for you as a tenant to reduce dilapidation liability. For example, if you have installed temporary partitioning walls, lighting, or ceilings, you must remove them and reinstate the property in its previous condition. You should also repair all the damages done to the property during the installation of additional fittings and fixtures. It would help if you did not wait for the lease term to expire and leave the repair work to the landlord. To control the repair cost, you should complete the job before the end of the lease term. Completing your task of repairing the property before the landlord serves you a schedule of dilapidation will help you avert a conflict.

Conduct a dilapidation survey near the end of the lease term.

If you want to reduce your dilapidation liability, you should conduct a dilapidation survey of your leased property before the end of the lease term. You should survey at least 6 months before the end of the lease term. When the property is still in your possession, you can decide to do the repair work as per the surveyor's assessment. Otherwise, you can negotiate with the landlord after you receive the schedule of dilapidation from the landlord.

Can my dilapidation liability be waived?

If the property is likely to be demolished at the end of your lease term, your landlord can waive the dilapidation liability. Under UK law, a tenant is not liable to repair the property if the property is subject to be demolished. Otherwise, the tenant has to restore the property or pay for the damages caused.

Conclusion

To reduce dilapidation liability, you should always conduct surveys at the beginning and end of the lease term. You should keep the property 'in repair' during your lease term. At Dilapidation Contractors, we provide all kinds of dilapidation services. Contact us today for a personalised and liability-free quotation.

Dilapidation surveys are necessary to evaluate the condition of your property or identify any damages that may require attention. A Dilapidation survey involves the skill of surveyors to inspect, observe, measure, and record the conditions of buildings or properties (Mahony, 2024). You may be required to hire a dilapidation surveyor for property condition assessment before the commencement or after the end of the lease term of your commercial property. To better understand various reasons for conducting a dilapidation survey, read the following discussion.

Determining property conditions before a new lease

If you are a landlord and ready to give your property on lease for commercial or personal uses, you should conduct a dilapidation survey. After conducting the study, professional surveyors prepare a building inspection report describing the property's condition. This helps to maintain transparency between you, as a landlord, and your tenant regarding the property's condition. Both landlords and tenants gain clarification regarding property maintenance obligations. Determining property conditions through surveys helps to avoid conflict between tenants and landlords at the end of the lease term.

Identifying building damages during or after the lease term

As a landlord, you may conduct a dilapidation survey during the lease term to determine damages caused by the tenant to the property. Section 18 (1) of the Landlord and Tenant Act 1927 provides legal grounds to measure damages during and after the lease ends. However, surveying the lease term can be more beneficial if you have leased your property for a long time. If a landlord surveys the lease term, he may also serve an interim dilapidation schedule. The Leasehold Property (Repairs) Act 1938 allows the landlord to exercise specific remedies for damages caused by the tenant through an Interim Dilapidation Schedule.

Preparing the schedule of dilapidation

A schedule of dilapidation is a legal notice served by a landlord on his tenants for not maintaining the property or keeping it in disrepair. A professional surveyor can serve it after conducting a survey. A dilapidation surveyor in the UK follows survey guidelines of the Royal Institute of Chartered Surveyors (RICS) to conduct a study meticulously. The schedule of dilapidation is also considered a legal document that can be used in a court of law to resolve a dispute between tenants and landlords.

Evaluating safety standards for the building

Dilapidation surveys can help you identify any critical safety issues in the building. After the Grenfell Tower fire incident, safety standards in high-rise buildings in the UK have become more strict. A mandatory occurrence notice must be submitted to the Building Safety Regulator (BSR), if a safety occurrence is caused or likely to occur. If you plan to conduct a dilapidation survey, you may identify damages to the building, issues in fire safety, etc., and take preventive measures.

Satisfying new tenants

Besides analysing safety concerns or identifying the breaches of covenants by tenants, surveying can help satisfy new tenants. The survey helps to identify property damages and their swift repair. When new tenants take the position of the building, they get the feeling of leasing a new property. As a landlord, you can also ask for a better price for the property as tenants are satisfied due to the aesthetic values of the building. Your tenants will also be happy to see transparency regarding property maintenance if you produce a valid survey report before them.

Protecting property value

Dilapidation surveys can help protect property value by identifying the need for maintenance. Professional surveyors can determine the property maintenance or repair requirements to protect property value. If you or your tenants keep the property in disrepair, it can lead to further property damage. A property survey helps to gain a clear picture of the condition of your property.

Ensuring sustainable maintenance

You can communicate with tenants during the lease term to ensure they follow a sustainable method for repairing property damages. After conducting a survey, you understand the present state of property disrepair. It can be helpful to plan for repairs using sustainable methods. For example, you can communicate with your tenants and ask them to use durable and reliable construction materials. This will increase the property's lifecycle and reduce maintenance costs.

Conclusion

A dilapidation survey conducted by a professional surveyor has various benefits for a landlord. It helps to evaluate whether the tenants properly manage the property, whether any severe damage is caused to the property, etc. A dilapidation survey can also identify any serious property issues. Based on a survey report, tenants are also satisfied with maintaining transparency throughout the lease period. At Dilapidation Contractors, we offer a range of services, such as dilapidation surveys, lease negotiations, dispute resolutions, etc. Contact us today if you are a landlord or a tenant who requires a reliable dilapidation contractor to take care of all your dilapidation needs.  Additional links Mahony, C. H. R. I. S. (2024). DILAPIDATIONS: Are the tensions understood by stakeholders? (Doctoral dissertation, Nottingham Trent University).https://irep.ntu.ac.uk/id/eprint/51457/1/Chris%20Mahony%202024.pdf

What are Dilapidations?

Dilapidations refer to a property's value decreasing at the end of a tenant's lease, for which the landlord can compensate. This can happen when the tenant fails to properly care for or repair the property or causes damage that requires replacing certain items. 

What causes Dilapidation Disputes

Dilapidations refer to breaches of a lease agreement, which can be costly if tenants do not fully understand their responsibilities. If a tenant fails to meet the obligations outlined in the signed lease, they may become liable for the cost of extensive repairs and any court expenses if the landlord decides to take legal action.

Approximately six months before the lease ends, the tenant will receive a Schedule of Dilapidations outlining all required repairs or refurbishments. Commercial leases include dilapidations clauses to safeguard landlords from the expense of repairing damage to their building or reversing any cosmetic alterations carried out by the tenant.

How can Tenants Avoid Dilapidations Disputes?

As a commercial property tenant, it is essential to understand your responsibilities when your lease expires. This will help you avoid any disputes. Understanding and comprehending the dilapidations clauses within your lease would benefit you. Before signing, we recommend you seek advice on the consequences of failing to meet your obligations and obtain professional assistance if you are unsure about any aspect.

Additionally, suppose your lease includes a clause regarding Interim Schedules of Dilapidations. In that case, your landlord may send you dilapidation schedules at various points during the term, in addition to the final schedule six months before the end of your tenancy. By preparing to undertake repairs well before the end of your lease, both financially and practically, you can prevent any disagreements with your landlord regarding dilapidations.

Building up a contingency fund throughout your lease term would be prudent, covering the cost of some or all likely repairs. You can also regularly monitor the state of repair of your building, which will help prevent further decline and spread the cost of any necessary repairs.

What are the most common causes of Dilapidations Damage Claims?

We understand that the dilapidation damage claims process can be complex and may cause frustration. Commercial leases often require tenants to undertake regular decorative works, such as interior updates every three years and exterior maintenance every five years. Failing to fulfill these obligations may lead to a dilapidation claim by the landlord.

Additionally, any alterations made by the tenant, even those considered improvements, will likely be included in the dilapidation claim, as the goal is to restore the property to its original condition.

It's important to note that structural issues may take time to be apparent and may be uncovered during a specialized dilapidation survey. Furthermore, if the rectification works take time, the landlord may be able to claim for the resulting loss of income.

While the dilapidations process is designed to compensate landlords for financial losses due to tenant activities, tenants are protected by the Landlord and Tenant Act 1927, which caps the damages that a landlord can recover.

What can Landlords do to Prevent Dilapidation Disputes?

Landlords should ensure that their lease agreements are clear and specific to avoid any misunderstandings or disputes regarding the property's condition. For example, if a landlord wishes the carpets to be replaced at the end of a tenancy, this should be clearly stated in the dilapidations clauses.

Similarly, if a new tenant wishes to make cosmetic alterations during their tenancy and the landlord requires these changes to be reversed when the lease ends, this should also be specified. Even if only minor cosmetic changes have been made, they may need financial input from the landlord to reverse and could potentially delay the incoming of a new tenant.

Furthermore, if landlords are concerned that their tenants may not properly care for or maintain the property to an acceptable standard, it would be advantageous to issue Interim Schedules of Dilapidations to protect their interests. The right to issue these interim schedules should be included in the lease agreement, along with the potential consequences for tenants who breach the lease covenant, such as a claim for damages that could lead to court action.

Conclusion

Tenants must thoroughly research and prepare to avoid disputes with landlords over dilapidations. Landlords must ensure tenants understand their lease obligations and the enforcement measures available if needed. Seek help from chartered surveyors with extensive experience resolving dilapidation issues and working with both parties to reach an acceptable conclusion. 

The Dilapidations Protocol is an important set of rules and procedures that guide how landlords and tenants should handle disputes regarding property repairs, maintenance, and other responsibilities. It establishes a structured framework for both parties to follow, ensuring a fair and efficient resolution. Our team has extensive knowledge of the necessary protocols and schedules for commercial leases, guaranteeing that all required actions are taken to fulfill legal obligations. This expertise allows us to provide clear guidance on the steps to take in the event of any disputes or breaches, whether physical or contractual. We understand the significance of compliance and will verify that all terms are fulfilled before proceeding. With our comprehensive understanding of the process, we can ensure a seamless resolution to any issues that may arise, providing you with peace of mind throughout the entire procedure.

How Does the Dilapidations Protocol Work?

When a commercial property lease ends, the landlord may seek compensation from the tenant if they believe the tenant has failed to meet their obligations to maintain the property, as stated in the lease. This would then prompt the Dilapidations or Pre-Action Protocol process. 

The Dilapidations Protocol is designed to simplify calculating any dilapidations claim and other related matters before the landlord or tenant starts court proceedings. If no agreement can be reached, the protocol encourages alternative dispute resolution through mediation and negotiation to avoid litigation.

Courteously, the Protocol aims to:

Encourage both parties to settle the disputed issues, avoiding costly and time-consuming litigation.

Ensure prompt and comprehensive information sharing about the dispute between the landlord and tenant.

Establish the court's expected guidelines for each side's steps before initiating legal proceedings, including a timeline.

Determine the content requirements and quality standards for schedules, Quantified Demands, and pre-action negotiations.

Facilitate effective management of proceedings if litigation becomes unavoidable.

We understand that dilapidation claims can be a complex and challenging process. Considering the potential costs involved and the impact any dispute may have, it is crucial to have experienced experts assisting you. The team of chartered surveyors at Dilapsolutions has extensive experience in handling all aspects of the Dilapidations Protocol, from initial discussions to providing expert evidence in court. We are here to support you throughout this process.

Substantial Compliance

The Protocol emphasizes that the Court is more concerned with substantial compliance with relevant principles and requirements rather than minor or technical issues. Both parties should know that failure to comply with the Protocol may impact the Court's decision on costs under CPR 44.2(5)(a). It is crucial to evidence compliance where possible. The Protocol outlines the steps and timeline for both landlord and tenant in terminal dilapidations claims, and parties should carefully consider the implications of Section 18(1) of the Landlord and Tenant Act 1927 on damages before proceeding.

Schedule of Dilapidations

The landlord must prepare and send the tenant a schedule detailing the breaches, required remedial works, and associated costs. The schedule must be in the form specified in Annex B (surveyor-prepared) or Annex C (landlord-prepared) of the Protocol, with the relevant endorsement. The schedule should be sent within a reasonable time, within 56 days after the tenancy's termination.

A schedule served before the tenancy ends does not need to follow the Protocol unless it starts the Protocol process strictly. However, it is best if the schedule complies with the Protocol. The landlord should also follow the lease terms to serve the schedule, such as the time frame and address. The Protocol recommends sending the schedule electronically so the tenant's comments can be included in one document.

Quantified Demand

The landlord must send the tenant a Quantified Demand within the same timeframe as the schedule of dilapidations. The Quantified Demand should clearly outline the dispute, the monetary damages sought, and other losses. It should specify if VAT applies, confirm the landlord's attendance at a meeting, and give the tenant a reasonable time, usually 56 days, to respond. The monetary damages and other losses must be fully quantified and substantiated, and the legal basis for recovering losses should be explained. The figures should be limited to the landlord's likely loss.

The landlord should carefully consider whether to claim the full cost of the works or if the relevant law limits the claim to a lower amount.

Tenant's Response

The tenant should respond to the Quantified Demand within a reasonable time, typically 56 days. The response should use the landlord's schedule of dilapidations, providing sufficient detail to convey the tenant's views on each item. The tenant or their surveyor should confirm that the proposed works are reasonable and the associated costs are justifiable, considering the landlord's intended use of the property.

Tenants are not required to respond to every item in the Quantified Demand, but providing their views on each item can help narrow the issues in line with the Protocol's objectives.

Process Before Issue

The Quantified Demand and Response are not formal legal statements. Disclosure is limited, but the parties can agree to provide more. Meeting within 28 days of the Response is encouraged to resolve as many issues as possible on a non-prejudice basis. The parties should consider alternative dispute resolution before litigation.

Before initiating proceedings, the landlord must provide the tenant with a detailed breakdown of the issues and losses based on a formal diminution valuation, actual expenditure, or a combination of both. The tenant must state their case for diminution and provide a diminution valuation to the landlord within a reasonable time, generally 56 days. Suppose the dispute is not resolved through the provided procedures. In that case, the parties should review their positions and evidence to determine whether the issues can be narrowed or the proceedings can be avoided.

Conclusion

The Protocol outlines a clear procedure for handling terminal dilapidations claims, which both parties should follow closely. While the costs of complying with the Protocol are not covered, they may be recoverable as part of the proceedings if a claim is filed. The court may require evidence of each party's compliance with the Protocol.

CDL's dilapidation services are the backbone of our operations. Over the years, we have proudly assisted on various challenging and diverse properties, including offices, retail units, factories, and even educational premises. Our expertise and unwavering commitment to excellence have made us the go-to choice for clients seeking comprehensive, reliable, and effective dilapidation solutions.

What is a Dilapidations Survey?

A dilapidations survey is a crucial tool used to ensure that landlords are not left out of pocket upon the expiry of a tenant's lease. This survey is conducted to assess the necessary repairs, making good, and yielding up requirements for the property.

Given the prevalence of fully repairing and insuring (FRI) commercial leases in England and Wales, the dilapidations survey plays a vital role in protecting the landlord's interests. It safeguards the landlord from incurring unnecessary costs to rectify the various defects accumulated in the property throughout the tenant's occupancy.

The dilapidations survey meticulously examines the property, considering the lease terms, its condition, and all relevant factors. This comprehensive approach ensures the landlord's interests are thoroughly documented and protected.

Upon completion of the survey, the surveyor will prepare a comprehensive dilapidations report, commonly called a terminal Schedule of Dilapidations. This report serves as a definitive record of the property's condition and the required remedial actions, ensuring that the landlord is not unfairly burdened with the consequences of the tenant's occupancy.

The total accumulated cost of the recorded and documented dilapidations is unambiguous. We have meticulously assessed the property's condition and compiled a comprehensive report detailing the necessary repairs and associated expenses. There is no room for doubt or uncertainty - the accumulated cost of addressing these dilapidations is a definitive figure that must be addressed.

As a Tenant, how can you prepare for this?

Tenants, take heed! When protecting yourself before moving into a new property, the answer is clear - instruct a surveyor to conduct a comprehensive Schedule of Condition report. This document will become the cornerstone of your lease agreement and safeguard you against pre-existing issues or defects.

Here at CDL, we firmly believe a Schedule of Condition report is necessary. It will ensure that you are not saddled with the responsibility of repairing problems that were already present when you took occupancy. As experienced building surveyors, we are uniquely qualified to provide these invaluable reports and detailed Dilapidations Surveys.

Protect your interests and avoid costly surprises down the line by securing a Schedule of Condition report before signing on the dotted line. CDL is ready to lead the way, equipped with the expertise to deliver the high-quality assessments you need to enter into your lease with confidence.

Conclusion

A Schedule of Dilapidation is a comprehensive assessment that ascertains the condition of a property under lease. It is suitable for interim, terminal, and final tenancy reports, and applies exclusively to commercial leases.

This assessment is typically instructed by solicitors acting on behalf of the freeholder/landlord. In cases where the lessee disputes the Schedule of Dilapidation or the associated cost guides, our dilapidations surveyors will firmly negotiate to arrive at an agreed resolution.

If you have received a Schedule of Dilapidation from your landlord, we strongly recommend you engage our expert services. We will provide you with authoritative advice and robust representation based on our extensive knowledge and depth of experience in this sector.

To discuss your requirements and secure our assistance, contact us without hesitation.

Many tenants tend to consider dilapidation liability towards the end of their lease term, as the property will typically require some work by then. This is also the point at which the landlord usually serves a dilapidations schedule.

However, it is essential to understand that a tenant's treatment of the property during the term is only one part of the story. Dilapidations effectively breach the lease terms relating to the property's condition. Therefore, the lease, which governs the relationship between landlords and tenants, is the key reference point for a tenant's obligations. These terms are fixed at the beginning of the lease, not the end.

One of the most crucial clauses in a lease regarding dilapidations is the one relating to repair. Intuitively, a tenant may assume that they will have no dilapidation liability to the landlord for disrepair if they return the property in the same condition as they found it. Regrettably, this is not the case, and clear drafting is required to prevent the tenant from being responsible for improving the landlord's property.

The concept of dilapidations encompasses more than just basic repairs. If a tenant has undertaken fit-out works, they may be obligated at the end of the lease to restore the property to its original condition. This requirement can apply even if the tenant believes their alterations have improved the property. The landlord's perspective often focuses on ensuring the space is a "blank slate" for future tenants who may wish to use the property differently.

Landlords need to ensure their rights are clearly defined within the lease agreement. For example, the landlord may have initially consented to the tenant's fit-out works and included a provision for reinstatement. However, if a subsequent lease renewal has occurred, that right may be lost without careful drafting and documentation.

Sustainability has become a key consideration for landlords and tenants when drafting leases. This is particularly important as landlords could face fines and penalties for letting properties not meet the required energy efficiency standards. Although the legislation in this area aims to make landlords responsible for upgrading their properties, landlords can pass the cost of these works onto the tenant through the lease. These costs could form part of a dilapidations claim should the tenant fail to comply.

A tenant's liability for dilapidations is often limited by statute. However, the lease terms allow a landlord to claim dilapidations beyond that statutory limit. Tenants should be mindful of such provisions in the lease. It is common practice for a landlord to add professional costs to a dilapidations claim. The lease governs how much they can do so, and landlords will naturally want these provisions to be drafted as favorably as possible.

A well-drafted lease can significantly assist in the amicable resolution of dilapidation disagreements between landlords and tenants. If the clauses clearly outline the respective responsibilities, then as the lease end approaches, a landlord can engage a specialist surveyor to inspect the property and prepare a thoroughly referenced terminal schedule of dilapidations. This would cover any disrepair and reinstatement for which the tenant is accountable.

Equally, from the tenant's perspective, they can, too, make preparations as the lease end draws near. This allows them either to undertake the repairs and reinstatement for which they know they are responsible or to return the property to the landlord in its current condition, with a clear understanding of any liability they may face.

Whether you are taking on a lease of trading premises or letting properties as an investment, the dilapidation liability issue starts with the lease negotiation. At this stage, both parties have the opportunity to ensure the obligations relating to the condition of the property are clearly set out and mutually understood. Leases that accurately reflect the parties' true intentions are the best tool for minimizing the risk of later disputes.

As the end of the lease approaches, it is recommended to review the terms and conditions outlined in the rental agreement, often referred to as the "rulebook." A swift and amicable settlement can be more readily achieved after the tenancy by familiarizing oneself with the established guidelines. This approach, grounded in mutual understanding and adherence to the agreed-upon policies, can help facilitate a smooth and harmonious transition for all parties involved.

Dilapidations

When a commercial lease expires, landlords routinely pursue financial claims against tenants. Tenants who are unaware of this practice may be caught off-guard by the substantial sums involved. In contrast, more experienced tenants who have navigated similar situations understand the steps they can take to mitigate or reduce dilapidation claims. As a tenant, you must challenge the landlord's list of required repair work (the schedule of dilapidations). To be in a solid position to mount a successful challenge, you need to address the dilapidations issue right from the outset, with the assistance of your building surveyor, before signing the lease.

Tenants face substantial business premises occupancy costs, such as rents and rates. To make matters worse, they are often served with a schedule of dilapidations at the end of their occupational lease. Dilapidations are breaches of covenant for which a business tenant is liable under the terms of a lease. The liability typically includes an obligation to repair and decorate. However, tenants can take several decisive actions to minimize these costs.

As a Tenant, when do I start thinking about Dilapidations?

Before signing a lease, you must conduct a thorough survey to establish the condition of the premises. This survey will provide a clear indication of the work required immediately and in the future. It is crucial to meticulously record the condition and layout of the premises before occupancy. If the premises are already in a state of disrepair, special considerations must be considered.

Regular and planned maintenance during the lease term is essential to avoid costly expenses later on. Neglecting this could lead to significant financial consequences.

What can a Tenant do to safeguard against Dilapidations charges?

Tenants must seek professional advice to understand their liability when signing a lease. The best way to minimize liability is to agree on a detailed schedule of conditions that accurately documents the premises' state at the lease's start. The repair covenant should then be limited to restoring the property to no better condition than at the commencement of the lease. Tenants need to take this critical step to protect themselves as failing to do so could result in significant financial and legal consequences. Tenants must be proactive and ensure a schedule of conditions before signing any lease agreement.

What should the tenants do before the lease ends?

Tenants must request a schedule of dilapidations from their landlord at least 12 months before the end of their lease. Alternatively, tenants should arrange for their surveyor to prepare a detailed list of the required works to mitigate their dilapidation liability. Obtaining the landlord's schedule ensures that the tenant fully understands the landlord's expectations, allowing both parties to align their views from an early stage.

Once the landlord has provided the schedule of dilapidations, tenants must have their specialist dilapidations surveyor review it. The tenant's surveyor will assess the reasonableness of the works outlined in the schedule. If any aspects of the claim are unreasonable, the tenant's surveyor must explain why to the tenant. It is important to note that a breach of a lease clause does not automatically mean the landlord has suffered a loss.

Tenants must be proactive in managing their dilapidation exposure and not hesitate to seek professional advice, as failure to do so could result in significant financial consequences for the tenant at the end of the lease term.

What must the tenant do if Damage occurs to the leased property?

Dilapidations must be adequately considered well in advance of the lease expiry. This allows the tenant to appoint qualified advisors to assess the liability for any repairs. The advisors will promptly initiate discussions with the landlord to agree on a solution, whether it's undertaking the work or a cash settlement. We suggest that dealing with repairs annually prevents a backlog at the lease end, which can otherwise lead to unexpected cash flow problems.

What if the property was in a poor state from the start?

As a commercial tenant, you must ensure the property is in good repair, regardless of its initial condition. Unless you and the landlord explicitly agree otherwise, the poor state of the premises when you took occupancy is irrelevant. You are legally obligated to restore the property to proper working order. Negotiate a lower rent or premium to offset the costs you will incur.

Alternatively, persuade the landlord to agree that the property be returned at the end of the lease in the same condition as when you took possession. Insist on a detailed 'schedule of condition' that accurately documents the state of the premises. Instruct your solicitor to modify the lease clauses to reflect this reduced repair obligation. 

As a Tenant, am I liable if I alter the premises?

Tenants are liable for restoring the property to its original condition and layout at the start of the lease. If a tenant makes alterations, they must obtain a license. The license will include a reinstatement clause detailing the work the tenant must perform to reinstate the property before the lease expires. Dilapidations are limited to reducing the property's value upon its return to the landlord. However, the reinstatement clause is mandatory, and the landlord can demand payment instead of the reinstatement work, even if the alterations have improved the freehold property's value.

Negotiating a claim

When there is uncertainty about a building's future, negotiating a claim without completing any work can be the most cost-effective approach. This can arise when a tenant anticipates their landlord may redevelop or convert the property after the lease ends or due to changes in market conditions since the lease commenced.

The reason is that landlords often struggle to prove their financial loss if works are not completed. Skilled dilapidations negotiators can identify and remove aspects of a claim that have not led to a loss. They can also help tenants submit a well-reasoned settlement offer, which can be more cost-effective than completing the work.

Do I have to accept the landlord's dilapidations claim in full?

We suggest not accepting the landlord's claim without seeking professional legal advice. Your dilapidations legal team will thoroughly review the figures and rigorously challenge any items that should not have been claimed. If they cannot demonstrate that the landlord's claim is inflated or unjustified, then they will not hesitate to reject it outright. 

Furthermore, you must consider the possibility that the landlord may not even intend to repair the property and could instead be planning to demolish or substantially alter it. In such circumstances, the landlord would have no legitimate grounds to claim for the total cost of repairs, as they would not have incurred those losses. Your legal team will be prepared to mount a solid legal defense against any such spurious claims.

What if I cannot solve with the landlord?

Landlords and tenants must avoid court proceedings at all costs. The legal process is slow and costly for both parties. Your legal dilapidations team can represent you in court, but this should be a last resort. Disputes are best resolved through mediation, expert determination, or arbitration. These alternative methods are more efficient and cost-effective for all involved. Landlords and tenants must take proactive steps to reach an agreement and avoid the burden of lengthy and expensive legal battles. The priority should be finding a swift and mutually agreeable solution outside the courtroom.

What are Dilapidations? 

Dilapidations refer to the unacceptable disrepair a property may be in during or at the end of a lease. It is crucial to note that a dilapidations claim arises due to the tenant's failure to fulfill the lease's repairing and maintenance obligations. The tenant must take full responsibility for rectifying these issues and restoring the property to the required condition per the lease terms. Failure to do so will lead to severe financial consequences, including the landlord's right to seek damages from the tenant. Thus, tenants must take their obligations seriously and comply with lease terms to avoid potential dilapidation disputes.

Commercial Lease Ends

At the end of a commercial lease, the assessment and claiming of dilapidations can often lead to disagreements between landlords and tenants. Dilapidations refer to damages, disrepairs, or alterations made without permission from the tenant, who is responsible for repairing them when they vacate the property. Tenants may view the necessary repairs as unexpected costs, leading to disputes.

As a commercial landlord, it is essential to understand your legal rights regarding who pays for a dilapidation report and the claims process to protect your interests from tenant actions. Knowing your legal position helps ensure a smooth dilapidation process.

Landlords' Rights in Dilapidations

As a commercial landlord in the UK, knowing your essential rights when it comes to dilapidation claims is crucial. Firstly, under the Landlord and Tenant Act 1927, you have an automatic right to claim against tenants for any breaches of their repairing obligations or damages to the property. This means you can legally seek compensation for any disrepairs or alterations the tenant was responsible for rectifying per the lease agreement.

Furthermore, you have the right to serve a Schedule of Dilapidations on the tenant during the last six months of the lease term. This document will specify all the dilapidation issues that must be remedied before the lease expires. The tenant must legally address these dilapidations outlined before vacating the premises. As a landlord, engaging in a Schedule of Conditions at the beginning of a lease is crucial to protect yourself and your tenants.

Moreover, the 1927 Act grants landlords the right to inspect the property's condition at any point during the lease term, as long as proper notice is provided to the tenant. This lets you identify potential dilapidations early on and bring them to the tenant's attention. Therefore, exercising this right and ensuring the property is being maintained to a satisfactory standard is essential.

Who Pays for the Dilapidation Report?

The responsibility of covering the cost of a dilapidation report commissioned by a surveyor falls solely on the landlord. This report is a crucial piece of evidence in supporting the landlord's claim against the tenant. To ensure impartiality, the report should be commissioned independently by the landlord and not jointly. Under property law, the landlord can inspect the premises during the lease term after giving notice and commission reports whenever necessary. If the claim goes to court and succeeds, the judge may award the reasonable report cost back to the landlord as part of the judgment. Any repairs deemed the tenant's responsibility will be recoverable through the compensation claim process.

Some Key Considerations for Commercial Landlords

The landlord must immediately arrange for a surveyor to inspect the property and determine the precise scope and cost of any breaches of the repairing covenant. The landlord is legally obligated to comply with any right-of-entry provisions in the lease and must provide the tenant with notice of any inspection. Once potential breaches have been identified, the landlord must serve the tenant with a formal notice or schedule detailing the required repairs and redecoration and giving the tenant a reasonable timeframe to rectify the breaches. Any notices or schedules must comply with statutory requirements and be served appropriately to be effective. Landlords must seek professional advice to ensure compliance. Negotiations with the tenant should be conducted promptly to reach an amicable resolution, which may include an agreement on the scope of works, a timetable for completion, or compensation instead of repairs.

Landlords must comply with or respond promptly to any notice or schedule received. Failure to do so may result in legal action to enforce compliance, recover repair costs, or seek damages. It is strongly recommended that a solicitor be engaged in such situations.

Taking a Claim to Court

When a commercial tenant refuses to pay for dilapidations after receiving a formal demand from the landlord, the court system must resolve the matter. The landlord must file a Part 7 claim with the appropriate court based on the property's location and serve it on the tenant to initiate proceedings. Both parties will disclose all relevant documents, including property reports, correspondence, repair estimates, photos, etc. If no settlement agreement can be reached, the court will set a trial date, and all involved must exchange witness statements and expert evidence prior. Pursuing a dilapidation claim in court can be time-consuming and complex, and landlords must seek experienced legal help to build the most robust case with thorough evidence and preparation. Dilapidations can be complicated and often contentious, but our dilapidation surveys can offer real benefits. Our dilapidation surveyors will identify the areas where damage or alteration to the property has occurred, where tenants are liable for repairs, and provide expert assistance to help with any court cases.

Conclusion

Managing dilapidations in commercial property leasing is a crucial and complex task requiring landlords and tenants to act decisively. It is imperative to comprehensively understand the lease terms, engage in negotiations, and seek legal advice as necessary. By proactively managing dilapidations, commercial landlords and tenants can maintain cooperative relationships and protect their interests. If you are involved in a dilapidations dispute, seeking assistance from a solicitor and/ or surveyor is essential, as their guidance can be vital in achieving a fair resolution.

What is a Dilapidations Survey?

A Dilapidation survey is a highly comprehensive survey and report that thoroughly assesses the current condition of a building. This assessment covers everything from the physical structure and systems to furnishings and overall wear and tear issues. Dilapidation surveys are typically conducted during a Lease Term or at the end of a tenancy, leaving no stone unturned in the evaluation process.

Dilapidations Specialist Surveyors

Dilapidation is a complex matter often misconstrued, especially concerning the distinctions between Commercial and residential leases. Our team is well-equipped to provide comprehensive guidance on leasing a property, from minimizing liabilities associated with new leases to offering Expert Witness advice on disputed claims. We serve a diverse range of clients, including corporate entities, private landlords, and property funds across the UK. Our specialist Building Surveyors are adept at handling any challenges that may arise, ensuring that our clients receive expert and practical solutions.

Consider Dilapidations Early

At Dilapidation Contractors, we understand the critical importance of addressing dilapidations promptly and strategically for both Landlords and Tenants. We approach each situation with a clear and decisive mindset, thoroughly assessing all strengths and weaknesses to develop a tailored strategy that aligns with our client's business goals. We meticulously review all relevant Lease agreements and other documents to comprehensively understand each claim. Our team is equipped to provide expert advice on potential dilapidations during company acquisitions, Lease assignments, and interim dilapidations. Whether you are a Landlord concerned about a Tenant's lack of maintenance or a Tenant disputing unrealistic claims made by a Landlord, we offer legal guidance on Lease obligations and protections to achieve an agreeable resolution.

Are you looking for a Dilapidations Survey?

We strongly advise both Landlords and Tenants to plan for dilapidations well before the Lease ends to ensure a mutually beneficial outcome. Landlords must know the building's condition before the lease ends and ensure the tenant is fully informed of the required work. Some landlords prefer to oversee the work's implementation, and early notification allows for defect monitoring and quality control. Others may choose a cash settlement, and raising dilapidations early enables negotiation with the Tenant. Don't delay - take action now to secure the best result for all parties involved.

Settling Dilapidations Before Lease Ending

As a Tenant, it is in your best interest to reach an agreement with your Landlord before the Lease ends. This will save you both time and money by avoiding any potential disputes. You must leave the property without incurring any additional costs. Once the Lease has ended, you have no control over how the Landlord implements repairs, which can lead to an increase in costs, including loss of rent, professional fees, and other expenses. By being proactive and understanding the potential works early on, you can obtain competitive quotations, establish historical events, and enter into early dialogue with the Landlord to reach a satisfactory outcome. It is also advisable to conduct periodic surveys during the tenancy to assess the work needed at the end of the lease and ensure the standard of maintenance remains high to reduce future dilapidations. Our team of qualified professionals provides the best advice from experienced residential or commercial dilapidation Surveyors throughout the country, from London to Leeds and beyond.

Our services cater to a diverse range of businesses, including small to medium enterprises and national and international franchises.

Commercial tenants should know the potential cost of dilapidations when their lease ends. The bill for repairing and decorating the property can be thousands of pounds, and many tenants are caught off guard as they focus on their new premises. Keeping the property in good repair throughout the lease is essential, and many business owners are unprepared for the dilapidation process. To avoid a hefty bill, tenants should understand dilapidation costs and plan accordingly.

What kind of things do Dilapidations include?

Dilapidation costs vary depending on lease agreements and may cover the removal of various fixtures and fittings, such as partitioning, cabling, signage, safes, lift shafts, furniture, and plants installed since the start of the lease. They may also include the replacement of kitchen, WC facilities, carpet, and lighting, as well as redecoration.

How do we mitigate the risk of costly dilapidation?

Read the Fine Print

Before signing a lease, make sure to read the fine print and understand the implications of dilapidation. A full repair lease may require you to pay for structural damage to the building, which can be costly if you have a short lease and little benefit from the investment.

Think before making alterations.

Tenants must obtain formal consent from their landlord before making any alterations, which should be documented in a license to alter. Tenants must consider the cost and time required for reinstatement works at the end of the term. Failure to do so may result in significant expenses and delays. Therefore, tenants must allocate sufficient resources for reinstatement works before the end of their term.

Keep on top of the repairs.

Commercial leases must be adhered to strictly, including the decoration covenants that mandate tenants to update the interior every 3 years and the exterior every five years. Failure to comply with these terms will result in significant costs at the end of the lease term, as additional work will be required to meet the requirements. Tenants must fulfill their obligations to avoid any financial consequences.

Seek Legal Advice

It's essential to have a solicitor review your lease agreement and a surveyor inspect the building before signing. A dilapidations survey may seem unnecessary, but identifying potential liabilities can save you money in the long run. Ensure your repairing obligations are fair and the landlord can enforce them during the lease. Note that a landlord is not required to provide a schedule of dilapidations before the lease ends, so consult with a building surveyor to assess potential liabilities and carry out any necessary repairs.

Negotiate

Negotiation is a crucial step at the beginning - ensuring you are delighted with the lease terms and a reasonable dilapidation schedule.

Budget for Dilapidation Costs

Companies must be aware of the actual cost of dilapidations, as it can become a significant financial burden towards the end of a lease. Failure to allocate funds for this purpose could lead to dire consequences, including bankruptcy. To avoid such a scenario, estimating dilapidations at the start of the lease and setting aside provisions for it throughout the lease term is imperative.

All time to undertake repairs and make good

Ensure you allow ample time to complete all necessary repairs, adjustments, and alterations before the end of your office lease. Failure to do so may result in costly penalties. To ensure quality work, consider hiring a reputable office fit-out company with experience in dilapidations work. If you choose to do the work yourself, carefully review your lease agreement to determine the required redecorating and cleaning standards. As a leading dilapidations contractor, Dilapidation Contractors has a proven track record of delivering exceptional results and restoring commercial properties to the highest standards.

Conclusion:

Creating a Schedule of Conditions is wise to protect yourself from potential lease liabilities and covenant breaches. Document everything from lease negotiations to paperwork execution and keep the property in good condition to minimize end-of-lease liabilities. If you plan on modifying or renovating the property, follow lease procedures and obtain the landlord’s permission.

If a Schedule of Dilapidations is issued, we suggest consulting with an experienced surveyor to assess the property and respond to the landlord’s claim. Use your surveyor’s technical arguments and negotiation tactics to dispute the claim. If a resolution cannot be reached, consider other dispute resolution options. A Schedule of Dilapidations will outline the necessary work to restore the property, which can be costly. Don’t let dilapidations catch you off guard – be prepared!

Our team of experts can help you manage your end-of-tenancy obligations and ensure that you only perform the necessary work.