Put simply, dilapidations represent ‘exit costs’ for a tenant at the end of their lease. These costs are usually attributed to restoring the property to its original state or pre-let state, i.e., repairs or reinstating any aesthetic alterations. Related directly to commercial properties, dilapidation is a term that every landlord and tenant need to understand. As part of their tenant obligations, they must adhere to the required level stated in the lease; if they fail to do so, actions need to be taken in order to meet the outlined level.
The first time a tenant tends to hear the term dilapidations is when they receive a schedule of dilapidations from the landlord.
A schedule of dilapidations is a legal document that a landlord must draw up before having the capability to make a formal claim against the tenant (also known as a dilapidation claim). The contents of this document will include all the clauses of the lease, which state tenant obligations in regards to the state or condition of the rented commercial property. Within this document, it will state the repair, decoration obligations, and any reinstatement of alterations carried out during the tenant’s term. In addition, it will identify any potential areas of work needed on the property (for example, minor cosmetic changes such as repainting or filling holes) and include a column outlining the landlord’s surveyor’s option for carrying out the work.
If you’ve been on the receiving end of a schedule, it can be an intimidating and daunting document, especially if the total figure is alarmingly high. The best thing to do in unfavourable situations is to remain calm and bear in mind that often the total at the end may not reflect what it is actually going to cost you to settle the claim.
Next, you should contact a solicitor or building surveyor. Your building surveyor will then work with you to assess the true extent of the case and your liability. Typically, there can be several repairs listed that may not be your responsibility under a professional interpretation of your lease. In addition, there may be items stated for which the work required has been overstated.
It is always worth noting that there is a statutory limit on the amount a landlord can claim for dilapidations, which can be based on the reduction in value of the property resulting from the dilapidations. If, for example, the landlord is looking to demolish the building, the dilapidations will have no effect on the value of the property, meaning there is no right to claim.
Like any legally binding matter, it is always best to be safe in order to prevent possible issues. Rather than wait for your landlord to serve a schedule, you should be fully aware of your obligations and take steps to guarantee you have measures in place to ensure the property is well kept. It also pays to ascertain the landlord’s plans for the property once your lease ends, just in case there are some repairs that you won’t need to undertake.
Dilapidations can be a confusing time, so if you’re uncertain about your exact liabilities, it’s always best to seek commercial property help from professionals.