Dealing with Dilapidations
Depending on the duration of a commercial lease, there are standard clauses for repair and redecoration which the tenant needs to deal with and not simply wait until the end of the lease. If a tenant does not deal with these obligations then any new tenant could attempt to negotiate a reduced rent, delay moving in or decide not to proceed at all. A landlord should conduct regular inspections of the property and in doing so could save time and money later.
Frequently Asked Questions
What can be done at the beginning or part way through the lease?
A Schedule of Condition, recording the state of repair should always be prepared prior to lease commencement. This protects both the landlord and the tenant.
If at any point from the beginning of the lease up to 18 months before the end of the lease, a tenant is not fulfilling their obligations under repair and redecoration clauses, it is strongly advisable to serve a formal notice on the tenant. This notice is in the form of an interim schedule of dilapidations.
The intention of an interim schedule is for the tenant to rectify issues highlighted in the schedule. For this reason, it does not usually include the cost of the repairs.
What can be done towards the end of the lease?
Interim schedules are not served in the final 18 months of a lease. At this point, a terminal schedule of dilapidations should be served. They should address the alleged breaches of the lease and the remedies required. A terminal schedule will usually include the costs but this is not always the case.
What can be done after the lease ends?
A final schedule of dilapidations can be served after the lease has ended. They should address the alleged breaches and the remedies requires, together with the costs.
How long does a landlord have to make a dilapidation claim?
A landlord can bring a claim in the courts for damages up to six years after the end of the lease. However, the amount of damages recoverable can reduce as time passes. From a landlord’s perspective, it is important to deal with dilapidations early and before the end of the lease wherever possible.
How much can a landlord recover in a dilapidation claim?
Dilapidation claims are intended to restore the landlord to the position they would have been in, had the tenant fulfilled their obligations. All remedial work must be reasonable and there are limits on the amount that a landlord can claim from a tenant.
The value of the property in its present state must be compared with the value of the property if the repairs are carried out. The difference between the two is the maximum claim that the landlord can make against the tenant, even if the cost of the repairs is more than this.
The landlord’s intentions are also relevant. For example, if the property is to be redeveloped this may impact significantly on the amount of damages that can be recovered.
There are options at each stage of the lease but whether they are open to you will often depend on the lease itself and specialist advice should be obtained from a solicitor specialising in dilapidation claims.
Why Act Now?
Taking advice quickly places you in a good position to secure the best deal for you. Delaying will give your opponent the opportunity to be one step ahead.