Dilapidations claims are becoming increasing common at the conclusion of commercial tenancies, particularly as landlords have been feeling the squeeze in current economic times. 

The times of tenants queuing up for commercial properties seem long gone and without tenants ready to take on properties as they stand, landlords are more eager to take advice and force tenants to put properties right or pay the price.

Dilapidations claims are what follow.  Where there is a repair obligation within a lease, or an obligation to return a property to its original state, an outgoing tenant can find themselves at the wrong end of a big bill.  Once dilapidations schedules (a list of work the landlord considers needs doing) are served, the dilapidations protocol process commences and there are costs implications if proceedings ensue and the protocol hasn’t been followed.

But what can be done to avoid or mitigate such claims from a tenant’s perspective?

Firstly, seek advice at an early stage.

It cannot be stressed enough that early advice is key. As early as possible. If you’ve entered a lease without taking advice, you’re too late.  Advice upon repair obligations prior to the entering of a lease is the ideal.  Without advice you may be left in a position whereby upon conclusion of even a short tenancy you are left in a position where you are obliged to reinstate an old building to as new condition.

If you haven’t taken advice you may find that simple terms such as ‘to repair, cleanse and keep the demised premises in good condition’ can become costly and place obligations upon the tenant that are not expected.

Again, if coming to an end of tenancy with such terms, always seek advice earlier rather than later.  Don’t wait for the service of a schedule of dilapidations before understanding the risk.  Under the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy (the 'Dilapidations Protocol') the schedule of dilapidations should be served within 56 days of the end of the tenancy.  This can mean that the schedule can be received 8 weeks after you have left, leaving you in a position where you have limited access to the property and (should the landlord be particularly unreasonable) no strict right to re-enter and carry out works.

A landlord’s schedule is then invariably very high for what may be relatively basic works (schedules will often include significant sums for the replacement of light bulbs).  Again, the best advice is to seek to deal with things sooner rather than later.  If experts can agree on the state of a premises and the work required prior to the end of a lease, then the tenant retains control over who carries out the work and at what cost. 

As a final top tip – be particularly careful of redecorating clauses.  Such a clause requires the tenant to redecorate the premises usually within 3 months of the end of the lease.  If that isn’t done it will be immediately obvious to the landlord and will serve as a red flag triggering the landlord into action who will then instruct a surveyor to prepare a full dilapidations schedule. Frankly, a landlord is unlikely to worry about a lightbulb or two unless pursuing other work and redecorating really is the low hanging fruit.

If a schedule is received, take advice.  There are often methods to challenge such schedules.  In one ongoing matter we have already reduced a pleaded schedule by around £70,000 by considering the work actually needed in that particular unit.

In addition there is an often overlooked cap on the schedule linked to the change in value of the property that the dilapidations represent. We can raise those arguments for you.

Top Tips

1. Act early: Take advice before signing a lease.  Understand the terms you are signing.
2. Act early: Before conclusion of the lease take advice on obligations and get the work done.
3. Act early: Seek to agree the condition with the landlord before leaving the premises and get exit strategies agreed.
4. Act early: Upon receipt of a schedule take advice immediately and before paying.  The schedule is often a wish list and open to challenge on both factual and legal grounds.