40 property
Is a landlord entitled to your money?
The world of dilapidations has changed significantly since the guidance protocol for terminal schedules came into force. No longer can a landlord expect a big fat cheque on the basis of a list of works it has no intention of carrying out, or which if carried out have little or no effect on the value of its asset, writes Matt Ward of Haslams, Chartered Surveyors
This is something all surveyors preparing schedules of dilapidations should be aware of, but it is still common to see schedules that are merely a wish list of works that are unlikely to be carried out.
This was demonstrated recently when Haslams acted for a tenant occupying a city office suite as a sub-tenant. Their lease was shorter than the head tenant’s and when it expired the head tenant wanted to re-occupy the property immediately. The sub-tenant had carried out alterations to the property but these were generally improvements as opposed to being specific to the tenant’s operational needs. A claim for
damages was issued on the basis of a schedule of dilapidations, which included little in the way of repair items, the majority of the claim relating to alterations. The total cost of the works was approximately £120,000 whilst the claim for loss of rent and other related matters was £180,000. Haslams advice to the tenant was to do essential works contained within the schedule but leave other items it was felt had no detrimental effect on the value of the demise. This approach also extinguished the claim for loss of rent as it was argued that the head tenant could re-occupy the property without the need for further disruption.
After works were completed by the sub-tenant, the head tenant issued a further schedule in the sum of £80,000, again the majority of this being a claim for loss of rent. A negotiation ensued including a lengthy discussion concerning the principles of common law loss, this being the finite limit of any claim for damages. The matter was finally settled for £15,000 and this case clearly demonstrated that there are many ways to approach a dilapidations claim and that it no longer hinges on a list of works, budget costings and a cheque passing hands. In fact that is the last thing a tenant should be considering.
If you have been served with a Corporate Real Estate – a changing strategic landscape
CRE, often an overlooked and neglected business resource, when ignored can be the catalyst for financial loss and potential business failure, writes Lizzie Rolley, chartered surveyor, Vail Williams LLP
Property is a core asset within a business which has a far reaching effect through operations, human capital, employee satisfaction and/ or retention, efficiency, operations, innovation, client relationships, corporate brand and sustainability. When plainly evaluated, the importance of managing these core assets will seem common sense to many within the professional services sector, but may not always translate as such into the wider business arena; according to the Real Estate Executive Board, a survey of various companies on this topic revealed only 18% possessed a long-term real-estate strategic plan.
The ways in which businesses utilise such bricks and mortar has significantly changed within the past decade. Fifteen year office leases and the ‘job for a life’ mentality has shifted with
businessmag.co.uk
success of US-based co-working office space provider WeWork illustrates this demand with its recent $5 billion valuation and aggressive international expansion. This reflects the agile working environment which has been adapted by many firms – requiring an attractive, flexible and adaptable workplace. Employees now demand a workplace that enables efficiency for their current task rather than accepting standard open plan offices as the norm.
businesses now requiring more flexible lease terms.
On the other end of the spectrum, managed offices, co-working spaces and third destination workplaces are becoming common place within businesses looking to attract the pigeon holed ‘millennials’ aspiring for a ‘Starbucks’ experience. The
Like most functions within business, property requires a strategy which is aligned with the overall business strategy, whilst affording flexibility should the needs of the business change. An organisation’s property portfolio needs to fit the needs of the business – rather than the other way around.
In most industries, a core challenge THE BUSINESS MAGAZINE – THAMES VALLEY –JULY/AUGUST 2016
is aligning the long-term nature of real-estate assets with the short- term nature of business events. While the aforementioned flexible arrangements may work in some instances it is foolish to assume that it will be suitable for larger and longer term working environments. While the requirements and demands of businesses are rapidly shifting to more fluid and flexible arrangements, corporate real- estate strategies need to adapt to this change in lieu of how this will affect the structure of their portfolio.
Lizzie Rolley 0118-9097455
vailwilliams.com
schedule of dilapidations or would like to discuss how to limit your potential dilapidations liability prior to entering into a lease, or at its termination, contact Haslams Chartered Surveyors.
Matt Ward 0118-9211533
www.haslams.co.uk
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