23rd November 2020
Roger Hannah
When a commercial lease is coming to an end, there are often many different things that both the tenant and landlord need to consider. The end of a commercial lease can be more complicated and costly than taking the lease out, so ensuring that you are in the know is hugely important.
Two things that are often brought up at the end of a commercial lease are building dilapidations and end-of-lease repairs. Landlords want to ensure that their properties are well maintained for the duration of a lease, which is why these two clauses are so important. For most landlords, building dilapidations and repairs only come into focus towards the end of a lease, when they want to make sure that their property is in the same condition as it was when it was first leased out and so that, given the state of repair, it can be re-let as soon as possible.
There is often conflicting information and advice when it comes to end-of-lease repairs and building dilapidations, so here is a quick guide.
Building Dilapidations and Commercial Leases
Dilapidations form a specific area of commercial law and relate to any breaches in the tenant’s lease obligations and/or covenants. Landlords may file claims for building dilapidation against tenants at any time during or just before the end of a commercial lease, or even after the lease has expired. If a landlord does make a claim, then there will be a claim document issued, usually referred to as a Schedule of Dilapidations, which contains references to any breaches in the lease obligations. Often, these relate to physical alterations made during the lease and the cost of reinstatement, repair or redecoration.
Ideally, tenants should keep records of the property from the start of a lease so that any disputes can be easily resolved when it comes to the end of a lease or if a landlord makes a building dilapidations claim. Proper maintenance and management of the facilities fall into the hands of the tenant during the occupancy of the commercial property, so if they wish to change, alter or fit the property, then the correct tenancy procedures should be followed by both tenant and landlord as outlined in the lease agreement.
End-of-lease repairs
Commercial leases tend to include obligations that both the tenant and landlord need to meet when it comes to building dilapidations and end-of-lease repairs. It is crucial that both parties are aware from the outset of who is responsible for these, especially when it comes to end-of-lease repairs. Tenants are usually responsible for maintaining and repairing a rented property and ensuring that it is in the same condition at the end of the lease as it was when the commercial lease started. Dilapidations, or end-of-lease repairs, are any fixes that the landlord needs to make because the property isn’t up to par.
Landlords are usually responsible for any repairs to the structure of the building which are needed to maintain commercial properties. This can include foundations, flooring, exterior walls and the roof. The tenant is responsible for taking care of issues like plumbing and electrical.
Avoiding Disputes
When it comes to end-of-lease repairs, having an in-depth and comprehensive commercial lease is key if you are looking to prevent disputes relating to dilapidations. In a commercial lease, it should be clearly stated as to who is responsible for repairing certain or various parts of the premises—either the landlord, tenant, or a third party.
If there are any unusual repair or maintenance obligations, then these must be outlined and contained within the commercial lease agreement. If you are unsure of something mentioned within your lease agreement relating to building dilapidations or end-of-lease repairs, either as a landlord or tenant, then please contact us today.