One of the salient knock-on effects of the remote working revolution is an increasing number of business tenants looking to exit their premises. And a knock-on effect of that is more disputes between tenant and landlord, namely in dilapidations claims.
Often a case of determining how much is owed, rather than whether there is anything owed, dilapidations claims can involve significant sums. Naturally tenants are keen to avoid financial exposure at the end of a lease term, so we have laid out some top tips to help minimise this liability:
- Dilapidations is the name given to tenant breaches of a lease which relate to the physical condition of the premises. The definition in the lease of the physical parameters of what constitutes the premises can make all the difference, and should be carefully considered as early as the drafting stage.
- Tenants should understand the practical implications of the wording of their repairing obligation at the outset. For example, an obligation to keep a premises in repair includes an obligation to put a premises into repair.
- Tenants should consider whether they want to place any limitations on their liability. A schedule of condition can be a useful point of reference to ensure that the tenant is not obliged to put the premises into a better condition that it was at the start of the lease.
- If a tenant fails to reinstate the premises after making alterations, this cost can form part of the dilapidations claim. Tenants should consider whether the service requirements relating to notice to reinstate provide enough time to restore the premises’ original format.
- Tenants should consider whether they want to carry out some or all of the dilapidations works themselves, which can reduce costs/the value of the claim.
- If the breaches have caused little to nodiminution in value to the premises, this can significantly reduce a dilapidations liability. Tenants should consider engaging a specialised valuer to determine this.
- Tenants should consider the landlord’s future plans for the premises. If aspects of the dilapidations claim will be superseded by works carried out at the end of, or shortly after, the term of the lease, this could impact on the landlord’s ability to claim for these items.
- Tenants should be mindful of the Dilapidations Protocol which governs these types of disputes to ensure that they do not fall foul of its requirements.
There is no one-size-fits-all when it comes to dilapidations claims. They are unique to the lease requirements and the premises in question, but being forewarned is being forearmed and legal advice should be sought in each case as early as possible to reduce or eliminate liabilities.