dilapidations property maintenance


For any company moving from their current premises, forgetting their obligations under their commercial lease could mean they’re in for an expensive surprise. Richard Scutt, building consultancy director at GL Hearn, reports.


Moving? Plan ahead to avoid expensive surprises


their leasehold obligations and what costs and liabilities these may place on them when they come to move from their premises. For a company considering moving


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from or vacating their current premises, either at lease expiry or after serving a break notice, forgetting their obligations under their commercial lease could be an expensive surprise. If a commercial property is not put back


into the same condition that it was in when the tenant first moved in, the landlord can claim for dilapidations to cover the costs of returning the property to its original condition. After the lease has expired, if the landlord is able to prove loss of rental income or service charge during the time that it takes to carry out these repairs, then the landlord may also claim for these costs, subject to current occupier demand for the property. This can make for a nasty and very


expensive surprise for some tenants when vacating their premises. If this isn’t sufficiently planned and budgeted for, it could make a hefty dent on a company’s bottom line. Dilapidations claims – claims for repair


against tenants towards the end of a commercial lease – is not an area based upon a single statute, but is the


16 l Property Management Select l september 2010 l www.pm-select.co.uk


hroughout the life of their lease, companies decorate and carry out alterations to their property to suit the changing needs of their business. However, they can sometimes forget about


accumulation of working practices and is influenced by statute over time. There is a ‘Dilapidations Protocol’ – a


Richard Scutt, building consultancy director at GL Hearn.


pre-action protocol for claims for damages in relation to the physical state of commercial property at termination of a tenancy – laid out by the Property Litigation Association (PLA). This is intended to guide reasonable proceedings in the arena. Its objectives are: • To encourage the exchange of early and full information between both parties; • To enable parties to avoid costly litigation; • To support efficient management of proceedings where litigation cannot be avoided.


Know what your obligations are


As soon as you are aware that you are close to the expiry of your lease, or you are considering utilising a break clause, then you need to start thinking about what your obligations are with respect to repair, redecoration and reinstatement of alterations that you may have carried out to your premises. You should dust off and examine your


lease agreement, as well as any supporting documentation. Particularly important will be any licenses to alter that you’ve agreed with your landlord for any alterations that you may have carried out during your lease term, as well as any schedule of condition. A schedule of condition may be either photographic or


text-based, or both. If there is a schedule of condition attached to the lease, the level of detail may help you to limit your repairing obligations and act as a good defence to any landlord’s dilapidations claim. Once you have all of the


documentation to hand, re-read the repairing, decorating and yielding-up clause in the lease to make sure that you’re familiar with these and what your obligations are. Some repairing obligations in leases can be more onerous than others, depending on the level of detail. For instance, the lease may require that the carpet be replaced in the last six months of the term, or that the walls be repainted in the last 12 months of the lease. The lease may also be specific about the level of decoration specification and require that you obtain prior approval of any colours from the landlord. If you have carried out any alterations


to the property during the term of your lease, then it is likely that you will be expected to remove these and return the property to its original state. This is something that could be important to bear in mind from the point of view of both cost and logistics. For instance, if you had installed partitioning to form cellular offices, meeting rooms or kitchenettes in your office space, you may be required to remove this and make good at lease expiry. It would also be important to


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