The Green Agenda is inevitably going to have an effect on property disputes going forward, and will certainly have a role to play in the settlement of future dilapidations claims. As existing leases of buildings end, it may well be the only opportunity for landlords to improve the green credentials of those buildings. It will also become more difficult, politically, for landlords to justify at lease end the ripping out and throwing away of kit and fit out which has not reached the end of its economic life. Perhaps even “ end of economic life” will take on a new meaning as we are encouraged to upcycle, recycle, and reduce carbon emissions.
As such, the often held assumption that landlords will insist on their tenants undertaking wholesale reinstatement as part of a dilapidation claim may need to be debunked. Such insistence might even become a reputational issue for landlords. Incoming tenants themselves may start choosing to not be associated with newly fitted out buildings but rather look for buildings that are selling themselves as reusing what is already there.
These changing attitudes to reinstatement at lease end could provide tenants with the means of reducing landlords' dilapidation claims. If landlords are looking to recover damages to compensate for costs of works that the tenant did not complete, the measure of those costs is not about the individual landlord. Instead, it is about what the reasonable costs for reasonable works that it is reasonable to carry out are. It is an objective test and may be judged against a landlord with carbon reduction targets and even one who embraces a circular economy principle. We can expect tenants to raise this argument as a defence to some claims. We can also expect arguments of supersession.
With the MEES regulations requiring higher standards for buildings, and landlords having their own published sustainability policies, tenants will be looking at the works necessary to meet these targets, and assessing when it is going to be possible for landlords to carry out the necessary works. Some will then defend dilapidations claims on the basis that tenant works carried out at lease end would be superseded.
Read our other predictions for 2022