Leasing a Warehouse,

Industrial Building

or Distribution Centre

Look out for a Dilapidations Claim

Independent Surveyors - Specialists in Warehouse Surveying

Our highly qualified independent surveyors will offer you advice on your property problems.    We can carry out Commercial Building Surveys on your prospective purchase and we can prepare a Schedule of Condition and Property Report in relation to your lease.  We carry out dilapidations reports for landlords or tenants.

If you have a commercial property, whether it is freehold or leasehold, then sooner or later you get involved with dilapidation claims.  You may wish to look at our Dilapidations Website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com. 

Free phone 0800 298 5424

Dilapidations Claims are as certain as death and taxes

For those of you still in a lease, especially when you are getting on well with the landlord, you should make provision for a future Dilapidations claim because as the heading to this section says – Dilapidations are as certain as death and taxes.

The reason for this, is that nearly all leases have provisions in them for you as the leaseholder or tenant, pay for the landlord or property owner’s Dilapidations claim.  Why would they not do it – they only stand to gain money?

Why wouldn’t a landlord serve a Dilaps?

In reality, there are a few reasons, why they wouldn’t serve a Dilapidations claim but as the leaseholder it is always best to assume that you will have a Dilapidations claim.

What happens in a Dilaps Claim?

The Landlord’s Chartered Surveyor compiles a list of repairs and other issues on the property, that they don’t feel have been kept to the condition as stated within the lease.  Remember a lease is a legal document with covenants (laws and rules) to ensure that you meet the terms of the lease. 

Leaseholders amazed by the list of property problems

We normally find that a leaseholder who has had a Dilaps served on them are amazed at the list of property problems and are really amazed at the depths that Landlords’ Specialist Dilaps Surveyors will go into with regard to the property problems and they will ultimately be amazed at the cost of these dilapidation problems.  On warehouses where there are lots of high level areas such as roofs and gutters, they rarely get maintained and they in turn if left, can cause problems to other areas.  It is no use arguing that the property was in a poor condition when you took it on, unless you have a Schedule of Condition, you give it back in the condition as stated in the lease.

Why are Dilaps reports so detailed?

The reason you get detailed Dilapidations is, the Landlord’s Surveyor would argue, to ensure that the Landlord doesn’t make a loss.  In reality we would also add that Dilapidations Surveyors are experts in the field that they are in and as such, they know the characteristics and typical problems in warehouses and industrial units and they do nothing else but make their living out of Dilapidations claims but they do have to know what they are doing.  It is certainly not an area for amateurs as it could be very costly to make mistakes.

Example photo - two storey concrete portal frame warehouse

As a Landlord with a Lease coming to an end – What do I do?

As a Landlord, if you instruct a Dilapidations Surveyor such as us, free phone 0800 298 5424, we would prepare a Schedule of Condition on repair issues and property problems all related back to the lease.  We would examine the lease terms to check what the liabilities are, a full repairing and insuring lease which is what a typical lease is, most of the responsibilities are down to the tenant.  We will give you strategic advice as to how to deal with any lease issues as opposed Dilapidations Solicitors and Legal Advisors who give you legal advice.

How do Landlords serve Dilapidations?

It very much depends when the Dilapidations is being served, if it is during the course of the lease then it may be served informally, at the end of the lease it is likely to be served formally by Solicitors, although some would say that it should always be served by Solicitors – particularly Solicitors!

Formal or Informal Negotiation

If the Landlord thinks they can rent quickly

If you think you can rent quickly with the property in the existing condition, this may change how a Landlord deals with the Dilapidations process and may be more than happy to negotiate on a foot squared rate or a metre squared rate.  They may do this without even serving a Dilapidations, but do remember it doesn’t stop the Landlord from serving the Dilapidations once the lease has ended.
 

What happens at the end of the lease? I’m a Leasehold Tenant

The more important question is what happens before the end of the lease, as this is the time you have to put the property in good order and the landlord doesn’t have to do anything, the onus is on you to give the property back in the condition stated in the lease, very much as the onus is on you to drive your car legally within the rules of the highway code, or probably a more close scenario would be for you to drive your lease car in the appropriate manner and also to give your lease car back in a form that is recognisable to the lease owner.

Example photo of a warehouse we have surveyed

We are waiting for the Landlord to serve a Dilapidation

The landlords have no legal requirement to serve a Dilapidations before the end of the lease, in fact it could be described as normal practice or good practice to only serve the Dilapidations at the end of the lease, once the tenant has gone.

Why does the Landlord serve the Dilapidations after the lease?

Many leaseholders or tenants are surprised that the landlord doesn’t serve a Dilapidations before the end of the lease, apart from them having no legal liability to serve the Dilapidations, can be to the landlord’s disadvantage, as he then gets a lot of poor quality, last minute repairs, carried out by the tenant who has never before carried out any repairs.

Why would you want poor quality repairs carried out on a property you then have to try and rent?

Looking at things from a property owner’s point of view, why would you want poor quality repairs carried out on a property you then have to try and rent?  It is much better if you can carry out the repairs to a good standard yourself.  The way to do this is to serve the Schedule of Condition once the tenants have left and carry out the repairs yourself.
	Example photo - internal view of warehouse

Arguments probably become most heated between the landlord and tenant when the tenant realises that the landlord has no intention of carrying out the repair work.  Indeed sometimes it can be even worse when the tenant believes the landlord is going to knock down the building and start again (known as supercession) please see our Dilapidations directory and definitions.

When the lease ends if work hasn’t been carried out then negotiations start

It is tempting for a leaseholder when the lease has ended, to carry out negotiations themselves, wanting to make a payment and walk away.  The property owners and landlords in our experience, tend to have very different ideas of what goes on then and will get a Dilapidations prepared known as a Terminal Dilapidations.  This gives a logical list of property repairs, based upon the lease requirement.  He will then get this priced via pricing books, general knowledge of the specialist Dilapidations Chartered Surveyor go out to tender.  They then need to carry out the works all within negotiation with the tenant and they tend to get back their costs and indeed legally they should only get back their loss.  Their loss can go beyond property repairs, let’s explain further.

Dilapidations Costs

Why they go beyond the repairs and redecoration issues?

Often tenants are surprised when the repair and redecorations list with costs etc, doesn’t stop and carries on costing in other losses such as loss of rent, payment of rates, loss of service charge costs, payment of insurance.  We could go on but hopefully you get the idea and if we put money next to each of them you get the idea of the sort of costs that can soon build up.

So in summary, there is a lot to think about with regard to the sort of things that can be included quite legally in a Dilapidations Claim.

Dilapidations – negotiate, negotiate, negotiate!!!

Just as they say, three things are important with regard to buying a property – location, location, location!!!  With Dilapidations we feel the best results can be gained where both parties negotiate, negotiate, negotiate.  Particularly these negotiations can take place before the end of the lease, this will put the tenant in a stronger position to do what we call a Strategic Advice Report, where we look at the potential claim and we look at the best ways to resolve it.  There are a surprising number of ways to resolve the Dilapidations claim.

Example photo of a warehouse

Dilapidations Negotiations – What really happens?

We feel the best negotiations are carried out based on a structured approach, whilst the Dilapidations protocol gives an overall view of the Dilapidations process it doesn’t go into detail with regard to the negotiation. 

Here are a few articles we have written on Dilapidations:

Information on Dilapidations

Dilapidations, the negotiation

Dilapidations – giving the property back to the standards set within the Lease 
 

Scott’s Schedules

There is a system that is generally recognised by all Surveyors which is known as Scott’s Schedules which is a spreadsheet system whereby the lease issues are identified that is how they are described, the lease clause that is in question is identified, the repair is identified (although not compulsory) and the costs are added.  Comments can then be made by both the Dilapidations Surveyors and the various elements are negotiated/agreed and ultimately a final agreement is made, which unfortunately the longer it goes on the more the tenant will pay for their Dilapidations Surveyor and usually they will be paying for the Landlord’s Dilapidations Surveyor too and that’s what it says in the lease.
The Dilapidations Protocol recommends that the format used in this example (or similar) is followed and it has been adopted by most surveyors that specialise in this area.
The Schedule of Dilapidations Protocol additionally recommends that electronic versions are made available so that the first copy produced by the landlord's surveyors can then be added to in the Tenant's Comments' and Tenant's Costs' columns by the tenant's surveyor.

In addition to this we have seen it recommended that a Travelling Scott's Schedule should be utilised where, after the initial landlord's comments and tenant's comments, further comments are made by each party in a different colour pen, for example the first additional comments being made by the landlord would be in a red pen and those by the tenant in a blue pen and further comments by the landlord in a green pen and so on until it gets to such a stage where it needs summarising and this document can be typed up.

Example of a Scott’s Schedule

It’s all about what it says in the lease

In summary Dilapidations are about the terms in the lease, so you should know and understand these on day one before you sign the lease.

Surveying articles

The above article has been written to stimulate debate and discussion. We hope that you found the article to be of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

The content of the website is for general information and entertainment only and is not intended to be relied upon for specific or general decisions. Appropriate independent professional advice should be taken before making such a decision. Free phone 1stAssociated.co.uk on 0800 298 5424.

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