In commercial property, the failure of tenants to comply with alteration and repair obligations can be a major issue. Leading to heavy costs at the end of tenancies. The result of this can be lease-end dilapidation disputes.
This is a claim which can be made as a result of a commercial tenant’s breach of contract. A strict process is in place in order to protect both the tenant and landlord in these cases, which needs to be followed exactly in order for the dilapidation claim to be successful.
Pre-Action Protocol
Prior to proceedings, there is a set conduct which the court expects the parties involved to follow. This is the ‘Claims to Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy.’ It also sets out a timetable and creates a channel for the exchange of information during the process. Both parties must comply with the protocol, irrespective of whether either party seeks professional advice or not.
Evidence of compliance is important, where possible, as sanctions can be placed if the court deems either party has not done so, typically a costs order.
Schedule of Dilapidations
To start the process, the landlord is required to send a Schedule of Dilapidations to the tenant. A document which sets out the breaches and the work required to rectify, as well as the likely cost of this. As per the Protocol, this should be served in a reasonable time frame post-tenancy. It is suggested that this be sent electronically to allow the tenant to reply.
Quantify
Alongside any Schedule, the landlord must also send a Quantified Demand within the same reasonable time frame. This needs to set out all of the particulars of the claim, specifically the monetary damages that may be sought as a result of the breach of obligations. This should be a sum which quantifies the overall loss for the landlord, not necessarily the sum of repairs; it can be inclusive, for example, of the loss of rent in the period following the tenancy in order to conduct repairs.
Tenant Response
Any response from the tenant needs to occur within the same reasonable timeframe following the receipt of the Schedule and Quantified Demand. The response should detail the tenant’s position so far that it is easily understood, but it does not have to address every point made in the documents that they receive within the Quantified Demand. However, it would be ideal to establish the true issues between tenant and landlord in the dispute.
The Pre-Action Protocol suggests a meeting between the two parties in the 28-day period after the tenant’s response. It is here that the parties should agree to as many of the items in the dispute as possible in order to narrow down the issues and come to a reasonable resolution.
Alternative Dispute Resolution
Both parties must consider whether or not a form of Alternative Dispute Resolution is suitable before taking the matter further. If the issue does persist into a legal proceeding, then both parties must show evidence that ADR was reasonably considered.
Litigation is an express last resort, and compliance with the protocol will be thoroughly assessed before any costs are awarded.
If the actions taken under the Protocol have not resolved all issues, then legal proceedings will begin.
If you are a landlord in need of advice regarding a dispute with a tenant, our lease advisory service team has over 80 years of experience across all property sectors, and our Dilapidations Experts are well versed in all commercial property issues. Here at Roger Hannah & Co., we can help give you peace of mind and the ability to move forward.