property maintenance dilapidations
familiarise yourself with what your repairing responsibilities are with respect to communal and external areas and the extent of your demised space. It would be advisable to appoint a qualified RICS building surveyor to undertake a dilapidations assessment during your lease term and prior to your lease expiry so that you are aware of the likely dilapidations claim. This would enable the company to make an allocation of money in its accounts, to avoid this being a large hit on your balance sheet at the end of your lease term. All of this relates to a lease coming to its end, but what about if you are using a break clause? If a tenant wants to exercise a break
clause to terminate a tenancy, that break clause may well contain specific conditions relating to both repair and redecoration of the premises. If these are not dealt with properly, the break clause would most likely cease to be effective. Because these clauses are often open to interpretation, if a company wants to exercise its break clause it would be strongly advisable to seek advice from a legal professional and an RICS building surveyor.
Talk to the landlord as soon as you can
In addition to making sure that you are aware of your obligations and the likely cost implications of these, it is advisable that you start talking to your landlord as soon as you are aware that you’re likely to move or vacate. This will help you to understand what your landlord’s intentions are for the property, and help
you to reach an amicable agreement without resorting to costly litigation. If, for instance, your landlord intends to demolish or substantially redevelop the property after you have moved out, then you may be protected under the second limb of the Section 18 (1) of the Landlord and Tenant Act 1927 as your dilapidations liability may be extinguished if the landlord has not suffered a loss due to the property being in disrepair. Depending on the amount of time
remaining before the end of the tenancy, a tenant may decide to undertake the repair and redecoration work themselves. This would of course also depend on whether they are in a position to vacate the premises before the end of the tenancy so that this work can take place. If you are going to be carrying out the
work yourself before your lease expiry, it would be wise to first agree the works with the landlord. It would also be advisable to consult an RICS building surveyor in assessing what works need to be carried out and drawing up the specifications. You would then need to tender the works to contractors for competitive prices and complete the works before the lease expires. However, if the works completed are not carried out to the landlord’s satisfaction and your lease obligations, the landlord may still be entitled to serve a dilapidations claim after lease expiry. Another option to settle a dilapidations
claim would be to negotiate the dilapidations claim with the landlord after the lease has expired, in order to agree a cash settlement; this is sometimes favoured by both landlords and tenants. If your decision is to hand back the property without making any repairs or
There is a ‘Dilapidations Protocol’ – a 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.
redecorating, and to then hope to negotiate any claim, you may find yourself in line for an expensive surprise. If the landlord carries out the work after the lease expiry, they may pick up repairs that hadn’t been noticed when the dilapidations schedule was first served. You may also run the risk of the landlord claiming for loss of rent and service charge during the works if these are carried out after lease expiry if it can be proved that the property was not in a state to be re-let.
Best practise
In brief, the best advice for any company reaching the end of its tenancy or wishing to exercise a break clause in its lease is: • Re-read your lease and understand what your obligations are. Understand what alterations you have made during the lease term, when you want to exit and whether you have the time to carry out repairs before you do so. If you’re at all uncertain, seek professional advice from an RICS-qualified building surveyor. • Open discussions with the landlord as soon as possible. Make a clear decision about whether you are going to repair prior to lease expiry, or negotiate with the landlord a cash settlement for any dilapidations claim after your lease has expired. Be aware of the likely damages that a landlord may seek if the lease has expired. If you are serving a break notice to exit
your lease, seek both legal advice and advice from an RICS building surveyor immediately. If you do not comply in full with your break clause, you may jeopardise your break clause being effective.
www.pm-select.co.uk l september 2010 l Property Management Select l 17
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