What are your rights as a commercial landlord in Dilapidations?

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.