Commercial Property Focus - November 2009
A Poor State of Affairs - The Rise of Dilapidation Claims
Over the past couple of years, the number of
dilapidation claims served by landlords against tenants has risen
dramatically. Dilapidations are the tenant’s cost of reinstating a
property back to the condition required by the lease. Claims have
increased because the recession has limited the redevelopment of
commercial premises; in a stronger market landlords may just
demolish premises that were in a state of disrepair, now they are
forced to spend money repairing and redecorating and want to claim
that money back from their tenant.
Dilapidations are potentially problematic for
both tenants and landlords. If a tenant is tempted to vacate
without first carrying out the repair works contained in a
landlord’s schedule of dilapidations served before the end of the
term, the landlord will point to the tenants yielding up and
repairing obligations in the lease to ensure the tenant pays for
the work and potential loss of rent whilst the premises are being
refurbished.
For tenants looking to move on from the
premises, it may be difficult to be sure that the premises are in a
state of repair which complies with their obligations in the lease.
If tenants are vacating premises as a result of a break clause in
their lease (allowing them to bring the lease to an end before the
lease term is up), then they may not have time to carry out any
repairs. Even more of a concern is if a tenant is obliged to comply
with this obligation to put in repair as a pre-condition of a
break. This can be very problematic for tenants and can easily lead
to a frustration of the break. In this position, a tenant may
be better off seeking to agree a schedule of dilapidations when it
exercises the break but if the landlord refuses to co-operate then
the tenant can be placed in a difficult position.
If they know that their lease is coming to its
natural end, tenants should consult a building surveyor before the
lease ends to ascertain an appropriate course of action. This may
seem an additional and unnecessary cost for those tenants who may
be vacating the premises because they cannot afford to keep up with
the rent payments anyway, but may prove vital in your defence
against a claim for dilapidations.
Matthew Williamson is an associate in
the commercial property team at law firm WeightmansLLP Matthew.williamson@weightmans.com