Dilapidations
Dilapidations
Dilapidations Settlements Acting for Landlord or Tenant
Commercial leases normally contain repairing covenants requiring the tenant to keep the leased property in repair.
The wording of the repairing clause is paramount the liability may include for only the internal parts (an 'internal repairing lease') or the interior, exterior, structure, services and grounds etc -(a 'full repairing lease'). The degree of repair or renewal required is the subject of much case law!
Leaseholders often do not fulfil these obligations and need to be reminded during the term of the lease. In particular, during the last year of the term, the lease needs to be enforced by the serving of a Schedule of Dilapidations. A Chartered Building Surveyor prepares this document, reading and interpreting the lease, visiting the premises to survey its condition and making a detailed report to a recognized format and standard; the Schedule of Dilapidations.
If the tenant still does not fulfill his obligations and vacates at the end of the lease, leaving the property in disrepair, then the landlord may seek recovery of his costs in carrying out the necessary repairs and redecorations - these costs will include any professional fees incurred for preparing the Schedule of Dilapidations and negotiating the settlement and also will include any legal fees for service of notice etc.
The landlords may also include claim for loss of rent, rates and for outstanding service charge contributions etc for the period that the property remains un-lettable and/ or repair works are being undertaken.
Landlords should take advice on dilapidations well in advance of expiry of the lease to ensure their interests are well protected. In all but the simplest cases the Building Surveyor will need to work closely with an experienced dilapidations Solicitor to ensure that the client's interests, be they landlord or tenant, can best be protected.
As a tenant/leaseholder:
Where the property is held under a full repairing lease then during or at the end of its term there are almost certainly going to be 'accrued dilapidations' arising - for which the landlord will serve notice and seek to have carried out (or in lieu - any costs of repair incurred by the landlord - including any legal and surveyors costs recovered).
A leaseholder may decide to do no work and to reach financial settlement in lieu, but this needs to be planned carefully and will depend on whether or not the landlord has any intention to re-develop the building, substantially refurbish it or change its use which may either mitigate or render the claim for dilapidations null and void. Claims by the landlord are in any case limited by what is known as 'damage to the reversion'.
A Chartered Surveyor can advise on the extent of repairs that will be required under the terms of the lease and what alternatives there are and the likely cost implications.
Clearly consideration of such matters should affect any decisions regarding the taking of a lease too so a survey of the property to establish what liabilities could arise during the term and taking of an agreed 'schedule of condition' upon entry could depending upon the wording of the lease save costs later.
The Building Surveyor will need to work closely with an Solicitor experienced in dilapidation law to ensure that the client's interests can be best protected.