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Commercial Properties – Dilapidations – ‘The Sting in the Tail!’

16 Nov 2017

Commercial Tenants who leave a property without carrying our repairs at the end of their lease, can create a financial liability which may undermine its future solvency. The state of the economy plays a major influence on a Landlord’s decision whether to pursue claims for disrepair (‘dilapidations’) against former tenants. In bad times, Landlord’s are more likely to do so; in good times, less so.

The golden rule: Don’t ignore dilapidations –Landlords won’t!

 

Tips for commercial tenants:

1. Try limiting your repairing obligations at the start of the lease by reference to a well drafted Schedule of Condition.

2. ‘A stitch in time’ - maintain the property throughout the term. It can save tenants a fortune in damages that may otherwise be pursued by a Landlord.

3. Get advice from a specialist dilapidations surveyor at least 12 months before the lease ends to advise on your potential financial exposure.

4. ‘Keep your ear to the ground’. Try to find out if the Landlord intends to redevelop the property. If so, this could substantially reduce/extinguish any subsequent damages claim subsequently pursued by your Landlord.

5. If you are unable to agree a financial settlement with the Landlord, it is far cheaper for you to carry out the works (as advised by your surveyor) than having to defend an expensive claim by the Landlord seeking damages to cover the costs of work, professional fees, loss of rent and all other losses it can think of!

 

Commercial Landlords

1. Avoid limiting your tenant’s repairing obligations with a Schedule of Condition;

2. Carry out periodic inspections of the property throughout the term to ensure it is properly maintained. If not, serve an interim Schedule of Condition.

3. Instruct your surveyor to inspect the Property at least 6 months before lease end.

4. Serve a interim Schedule of Condition putting your tenant on notice as to likely remedial works required before lease end. At this stage, it can, though need not be, a ‘terminal’ Schedule complying with the Dilapidations Protocol.

5. Serve a terminal Schedule of Dilapidations within 56 days (or such time as the lease provides) from the date the lease ends complying with the Dilapidations Protocol.

6. If alterations have been carried out to the property, ensure that notice to reinstate is served in good time before the lease ends.

7. Adherence to the Dilapidations Protocol will ensure a tenant treats claims far more seriously than if pursued months (or years) later!

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