Partner Article

Dealing with dilapidations, the departing tenant's unexpected bill

A leading commercial property lawyer has reported an increase in the number of dilapidations claims, with tenants being ‘caught out’ by unexpected six figure claims when they vacate a property at the end of their tenancy.

Andrew Beattie, commercial property specialist with Tilly Bailey & Irvine Solicitors, warned: “For most tenants, the first they know about dilapidations is when they are served with a schedule of dilapidations, which contains the landlord’s estimate of the cost for carrying out works to the property. It is becoming more and more common that the costs in these schedules reflect a figure that the landlord would like, rather than what he is actually entitled to. Often the total figure can be well into six figures. We have entered into negotiations on behalf of a number of tenant clients, and although these negotiations can be technical, they nearly always result in a substantial reduction to the amount paid to the landlord.”

In a recent case, Tilly Bailey & Irvine was instructed by a tenant occupying a city centre office who was served with a schedule of dilapidations with costings exceeding £100,000.00. After a period of technical negotiations, this was reduced to zero.

‘Dilapidations’ are a payment by a tenant to a commercial property landlord to compensate for the cost of repair and ‘making good’ any damage or alterations which occur during the tenancy. A departing tenant will receive a schedule listing each breach of their lease and the cost allocated for the repair. Costs are often listed for statutory breaches such as keeping an up-to-date asbestos register, or provision of electrical test certificates. Additionally, the total cost will also include surveyor’s fees and a claim for loss of rent while the property is being repaired.

Andrew Beattie advises that, before completion of a lease, the new tenant should employ a surveyor to prepare a ‘Schedule of Condition’, to provide evidence of the condition of the property. The tenant should then ask a lawyer to qualify the ‘Repairing Covenant’ in the lease documentation by referring to the Schedule of Condition. He further advises that during the tenancy the tenant should keep a record of all works undertaken and, during the last six months of the tenancy, should instruct a commercial property lawyer to assess, and if necessary negotiate any dilapidations liability.

Andrew concluded: “Being aware of what dilapidations are, and how to mitigate them, is vital for tenants. Preparing before the lease begins, keeping records throughout the tenancy, and completing any remedial works before the end of a lease all put the tenant in a strong position. There are many instances where the landlord’s six figure bill is, after technical negotiations, reduced to a much lower figure, but to avoid the worry that comes with an unexpected claim we recommend taking professional advice at the outset from an appropriately experienced solicitor.”

Tilly Bailey & Irvine Solicitors is the Tees Valley’s largest full service law firm with offices in Wynyard Park, Stockton on Tees, Hartlepool and Barnard Castle. It has a multi-disciplinary business law team, based at Wynyard Park, offering expertise in fields including commercial property, dispute resolution, mergers, acquisitions and disposals, intellectual property and employment law. For further advice, contact Tilly Bailey & Irvine Solicitors on 01740 646000.

This was posted in Bdaily's Members' News section by Tilly Bailey and Irvine Solictors .