Top Ten tips for landlords - Dilapidations at lease end
During the economic downturn, lease end dilapidations disputes
increased as claims were more vigorously contested by tenants
seeking to exploit the effect that weak demand for business space
had upon the level of damages sought by Landlords. As the economy
gradually improves this is set to continue, with occupiers seeking
to relocate due to expansion or rationalization of their business
space, lured by incentives from competing Landlords.
Michael Jones, Partner at Powell Williams' Birmingham office,
offers ten concise tips to help Landlords obtain the best outcome
from the dilapidations process at lease end:
1. Maintain working relationship - Either
directly or through a managing agent, maintain a working
relationship with your tenant throughout the duration of the lease.
Make sure you have an awareness of the condition of your building
during the currency of the lease and don't leave it until the end
of the term.
2. Be proactive - With your consultants be
pro-active and devise a clear strategy of your options for the
premises approximately 12-18 months before the end of the lease. Is
the building to be retained in its current, albeit repaired form,
or is it to be modernized or significantly altered or even
demolished? Each of these variables could impact upon the level of
any subsequent dilapidations claim and will have to be declared in
accordance with the pre action protocols "statement of truth".
3. Early Dialogue with Tenant
- Consider whether it is in the Landlord's
interest to open dialogue with the Tenants and their advisors as
early as possible. Powell Williams LLP generally suggest that
Terminal Schedules of Dilapidations should be issued within the
last six months of the lease, however the more complex the issue,
the sooner the dialogue should be opened and the schedule
4. Importance of accurate documentation
- Before commissioning the preparation of a
schedule of dilapidations, ensure you gather all occupational
documents, leases with coloured lease plans, license for
alterations and supporting documentation, schedules of condition
and colour photographs if available etc. Supply to consultants
prior to them proceeding with site
5. Mitigate Loss - Seek to
minimize any void following lease end, which can be attributable to
the condition of the building. This is best achieved by serving the
schedule of dilapidations on the Tenant in sufficient time for them
to remedy the disrepair following consultation between the parties.
If a cash settlement is to be agreed then instruct your building
surveyor to competitively tender the repairs ready for a start on
site as close to the lease end date as possible.
6. Commercial Value - As the end of the lease
approaches, be aware of the commercial value of the building and,
at this time, take advice on how its condition impacts upon
7. Realistic expectations - Be
realistic in your expectations for the value of the settlement to
be achieved. Dilapidations should not be seen as a funding vehicle
for significant refurbishment, upgrading or redevelopment works.
Inflated claims with an eye on negotiation would not only be
counterproductive, but also risky for the Landlord, should the
matter proceed to litigation.
8. Supercession - Keep your
dilapidations surveyor in the loop if you are proposing any upgrade
or alterations of the premises, which would render valueless items
of repair identified within the schedule of dilapidations. e.g
repairs to a suspended ceiling when the Landlord proposes to strip
out and replaced with a more modern installation. Under these
circumstances damages cannot be claimed for this item.
9. Rent frees - If rent free inducements are to
be offered to prospective tenants then these should be scheduled to
reflect the cost of building works undertaken to remedy items of
disrepair and not rent free incentives merely to attract a
10. Summary -Dilapidations is not a licence to
print money, but by appointing the right team, being proactive and
devising the right strategies, then the best outcomes can be
For further information or advice, contact Michael Jones by
emailing MichaelJones@powellwilliams.co.uk or by calling 0121 486