How can a Tenant avoid a Dilapidations claim?

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.