DO NOT LET THE END OF YOUR LEASE

END YOUR BUSINESS!

This may appear to be an extreme statement, but if you have not planned and made suitable allowance for the cost of dilapidations and repairs at the end of a lease, this could be the consequence.

Dilapidations are basically the repairs, redecoration and reinstatement works, which are necessary at the end of a lease where the tenant covenants to carry out repairs. Too many firms make the mistake of assuming that the relevant standard is the condition in which they took occupation of the premises, but unless there is a specific exclusion clause, the standard is one of “good repair”. To comply with this standard, it may well be necessary to leave the premises in better condition than when the lease started, or was assigned.

The average lease also includes a clause to “yield up” the property with all of the tenant's alterations, which includes partitions and services, removed and the building reinstated. Both of these clauses are in addition to regular internal and external redecoration clauses in the average Full Repairing and Insuring Lease.

It is usually very difficult to carry out these works while the building is occupied and the tenant is preparing to move somewhere else. As a result, the claim for damages for breaches of these clauses is usually settled by a single payment. In addition to the cost of repairs, the claim includes loss of rent while works are carried out, other expenses incurred by the Landlord, including rates and fees to agree the dilapidations and administer the building contract.

Relevant legislation and case law limits the claim for damages for works etc., to the amount the Landlord has lost in a capitalised loss of rent, by the lack of repair and the need to reinstate the building after the tenant has vacated.

All tenants are advised to seek advice from a chartered surveyor who specialises in such matters, to make sure that they are prepared for this inevitable claim, which will occur unless, for example, they know the building is to be demolished when their lease ends. The experienced surveyor can then negotiate on the tenant's behalf to ensure only appropriate items are include in the claim. If involved before the claim is prepared, he may also advise how to prepare the building so that the claim can be reduced before it is prepared by the landlord's surveyor.

It is thus easy to see how, for example, a ground floor single shop unit with a flat roof where the shop fittings are left in place, the electrical services are old, the roof has been patch repaired and some windows are rotten, can lead to a claim of £40,000 plus VAT, plus loss of rent, rates and insurance refunds etc., as we had on a recent case.

Author: Roy J Ilott, FRICS

BIOGRAPHY

After working in private practice and for several property owning companies, Roy Ilott set up his own practice in 1980 and this developed in the maintenance, refurbishment and extension fields. Over the last 15 years, this has been re-focussed to deal with defects analysis, dilapidations and reports on building surveying matters as an Expert Witness.

Roy is extensively involved with the RICS and other bodies promoting the skill and role of the Chartered Building Surveyor. This has included appearances on radio and television, often as an Expert in building maintenance and defects.

To demonstrate his commitment to providing independent expert reports on properties and defects across Southern England , he has opened a new office in Warminster, Wiltshire.