Dilapidations

Overview

Dilapidations are part of a legal procedure based on any breaches of covenant in the lease, relating to the condition of the property. The repairs required during or at the end of a commercial lease are referred to as dilapidations and can include repair, redecoration and full reinstatement back to the original layout.

Dilapidations are a complex and specialist field. Jonathan Cornes Associates is a firm of chartered building surveyors working with investors, developers and occupiers in both the public and private sectors across the UK. Our team has extensive experience of small and large scale dilapidations, working with both tenants and landlords. Our experts have a sound knowledge of relevant legislation and case law.

As members of the RICS Dilapidations Forum we attend an annual conference, providing our team with critical updates on dilapidations disputes and a roundup on the latest case law.

Process

A dilapidations claim is an allegation of breach of contract and is actionable in law. As chartered building surveyors our role can include acting as an expert witness, an adviser or dispute resolver. A Schedule of Dilapidations is typically served by the landlord in the last six months of a lease and outlines the works the landlord deems necessary, including a claim for damages. Here is a brief breakdown of the process:

  1. Landlord appoints a dilapidations building surveyor to prepare a detailed Schedule of Dilapidations
  2. Schedule of Dilapidations is served on the tenant by the landlord or their solicitor
  3. Tenant instructs a building surveyor to assess the claim on their behalf
  4. Tenant instructs the building surveyor to either organise for the work to be undertaken or agrees a financial settlement
  5. Completion of the dilapidations process

 

A landlord can serve an Interim Schedule of Dilapidations at any point during the lease term. However, the lease must be longer than seven years, with more than three years remaining. Concerns during the term may include; the building not being adequately maintained, complaints from other occupiers, risk of the tenant going insolvent, potential loss in value or insurance invalidation.

Advice for landlords

A landlord must be compensated if the tenant has breached the agreed obligations set out within a lease and the landlord has suffered a loss as a consequence.

We advise landlords that a Schedule of Condition is an essential part of any lease as it establishes the state of a property prior to tenancy. From the landlord’s perspective, the condition of the property is recorded from the moment the lease is signed. So, if it is in good condition, newly decorated and has newly fitted carpets, the tenant would need to ensure it remains that way. If the tenant has made alterations, such as partitions, these can be clearly identified. It helps to ensure that the tenant complies with the covenants of the lease. Our surveyors can provide this service on all commercial properties.

Advice for tenants

Before signing a commercial lease, tenants should make sure they fully understand the repairing liability. It is vitally important that tenants fully understand their obligations in regard to dilapidations, without this consideration they could stand to lose substantial amounts of money.

Every commercial lease that states the tenant must ‘keep the property in good condition and repair’ also implies that they have a responsibility to ‘put the property into good condition and repair’. This could mean that if the tenant signs the lease on a property with a leaky roof they become responsible for its repair.

A Schedule of Condition resolves this problem as it prevents the landlord from demanding that the property be brought up to a higher standard than its initial condition. The evidence set out in a Schedule of Condition can be used to compare the state of the premises at the end of the contract against the condition at the time the lease was signed.

If a tenant comes to the end of a lease and has a dilapidations claim served, it could cost them a great deal of money. Even on a very small property, such as a high street shop, it could cost between £15,000 and £30,000. A Schedule of Condition could, at the very least, halve that amount if not reduce it to practically nothing. Our experienced surveyors can provide this service.

Ultimately, keeping the property in good repair during the lease will reduce any claim at the end of the term

Jonathan Cornes Associates’ Solution

We have experienced and specialist RICS chartered building surveyors to prepare or defend dilapidation schedules. We also have an in-house project management team to oversee and manage dilapidations works. As a tenant this helps to limit your liability, and as a landlord it helps to crystallise the loss and may also be claimed as a capital allowance. The process is carefully managed by the dilapidation surveyors to ensure transparency and fairness. Under our direction the correct quality of workmanship is achieved without jeopardising the dilapidations position of the parties involved.

If you are a commercial tenant we can also complete a dilapidations assessment, which involves identifying works likely to be required at the end of the lease. The assessment allows you to financially plan for the potential claim, reducing the negative impact at the end of the term. In addition, this can also have tax advantages by allowing you to distribute any tax saving across the term.

If you require any further information, or wish to arrange for our team to meet with you, please contact us.

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