Beware of the late served Schedule of Dilapidations
by the landlord, it could be very costly
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We have been brought into deal with a case where the landlord has appointed specialist dilapidations surveyors to carry out a Schedule of Dilapidations on some fairly basic buildings that were in a reasonable condition, albeit that they had been used for five years or so for the tenant's business, as you would expect.
Schedules of Dilapidations
The tenants, also known as leaseholders or business people were perfectly happy with carrying out the schedule of dilapidations work. They were looking forward to moving into their new premises and the original premises had served them well, indeed they had taken on adjoining premises and adjoining premises to that, as the business had expanded.
Opportunity for a new lease
The opportunity they had to have a much larger unit that would meet all their current needs meant they decided to take on a new lease. As far as they were aware they were perfectly on good terms with the present landlord, so what happened next came as a surprise (but as predictable as death and taxes).
Schedule of Dilapidations promised but never arrived
The business owners (or the tenants or the leaseholders) were busy, as is anyone running a successful business, so they didn't give too much thought to the fact that the schedule of dilapidations didn't turn up.
They were pleased to see the dilapidations surveyor come to the building and take site notes to prepare a schedule of dilapidations. At first they didn't give too much thought to the fact that the schedule of dilapidations wasn't actually sent to them, then a month or so went by since the inspection. They made a few phone calls to ask what was happening. Then two months went by and they made further phone calls and e-mails as to where the schedule of dilapidations was, as they wished to carry out the work.
National company problems with the computer for a few months!
They were assumed advised during various phone calls that there were problems with preparing the schedule of dilapidations and that the company had had computer problems, etc, which seemed slightly strange as the company is a national company. Nevertheless, the leaseholders (tenants or business people) were busy so it wasn't at the front of their mind.
Lease comes to an end
As it was getting nearer the end of the lease the leaseholders decided to do a general tidy up and clear to put the building back to the sort of standard it was in when they leased it five years previously. They regularly admit that they carried on running their business during this time as they didn't wish to disrupt it too much but they felt that they were on good terms with the landlord and that when the schedule of dilapidations arrived they would simply carry out the work. The problem was that no schedule of dilapidations ever did arrive. You may be surprised hear that this isn't the first time that we have heard this story and in years gone by it was difficult to do something about the landlords issuing the schedules of dilapidations, but with recent legislation you now have some options.
Schedule of Dilapidations served a few days after the end of the Lease, but only after the locks had been changed, so no access was possible into the property
Interestingly, as soon as the business lease was up and the tenants had vacated the property, a schedule of dilapidations notice arrived. To each unit it was costed at more than six times the annual rent:
i.e. annual rent of £10,000, the schedule of dilapidations costed at over £60,000
i.e. annual rent of £25,000, schedule of dilapidations served at £150,000.
We don't want to give the exact figure away, but we do want to show the magnitude of the schedule of dilapidations claim.
The ex-leaseholders (tenants or business owners) thought right we will go back and carry out the works ourselves now we have the schedule of dilapidations. They went back to find that the locks had been changed so they were unable to access the property (as is legally correct).
Interestingly and ironically, they commented that the maintenance work had never been carried out so quickly when they had actually been in occupation, which had been for many, many years and, indeed, they used to joke with the managing agent that the only thing they ever did was collect the rent and fix one roof leak in five years!
Dilapidations problems what do you do?
They sought advice and went to a surveyor, who unfortunately didn't specialise in dilapidations cases. They did their best but realised they were out of their depth and unfortunately weren't able to help much, as unfortunately did the solicitors they appointed, who again were not specialists in this area. All recommendations came from well meaning friends but you do need to be so careful when dealing with specialist law, such as dilapidations law. A few good things did come out of the appointments of the non-specialists; the chartered surveyor did manage to get into the building so he could check the work that the landlords had specified in the schedule of dilapidations and comment on it and, indeed, get it priced. Interestingly, the price was approximately 25% of what the landlords pricing had been. You may find this surprising for us to say that we don't find this surprising.
So let's put some figures on this:
We now have an annual rent of £10,000 with the landlord's schedules of dilapidations costed at £60,000 with today's estimate being £20,000.
Alternatively, an annual rent of £25,000, a schedule of dilapidations served at £150,000, with it being costed at £35,000, so substantial differences in the costs.
Building owners estimate on cost of schedule of dilapidations three times more than our surveyors on a like for like basis
Sorry it is such a long title, but we really needed to say what was happening.
When a schedule of dilapidations comes in there are two
issues to look at on a schedule of dilapidations:
Firstly, should the items be recorded as dilapidations at all? This depends upon the lease terms. You need to look into the covenants. These break down into repairing covenants, redecoration covenants, reinstatement covenants and statutory regulation covenants, together with a yield up clause. Of course they could, and often do, have different names and you are best off having someone who knows what they are doing check these; as these business owners would agree. They can make far more money doing what they are best at.
The second thing you need to check with a schedule of dilapidations is are the costs accurate and appropriate? All we have done in this instance is just check are the costs accurate.
As the lease has ended a monetary agreement is the only answer, or is it?
As the landlord or building owner's surveyor rightly states that the lease is ended and therefore the tenants can't gain access to carry out the work. However, interestingly, we believe that as the surveyors that served the schedule of dilapidations, albeit three months after they originally inspected, should be complying with The Royal Institution of Chartered Surveyors (RICS) Guidance Notes and the Civil Procedures Rules (CPR) on dilapidations. Unfortunately, the non-specialist surveyor was unaware of this, so in this particular case this is the starting point.
So, what can we do for these people to save these people money on the dilapidations schedule?
In this case we have put together an argument (and a very good argument against the schedule of dilapidations) that the schedule of dilapidations was never served to the appropriate Guidance Notes and Protocol and have made an offer far less than the original claim.
Interestingly enough the landlord's surveyor had not read the RICS Guidance Notes and Protocol
When we phoned the landlord's surveyor and advised him about the RICS Guidance Notes and Protocol he advised that he hadn't read them lately (we would read this as hadn't read them at all!) and would have a read and come back to us. This really is an amazing situation as all surveyors should work to these RICS Guidance Notes and Protocol. However, we are aware that many surveyors read them when they were at college or university but hadn't read them since and things do get updated.
As I write this we are still in negotiations with this surveyor but we are very hopeful that our clients (the leaseholder/former tenant) will be given access to re-enter the property, albeit that he will have to pay an extra month's rent, and he will be able to carry out the works himself at approximately one third of the cost that the landlord originally quoted. In fact we are hoping to save further money when we go through the schedule of dilapidations itself.
See our other articles on Dilapidations:
We hope this helps you but if you want any further independent expert advice from a surveyor with regard to leases, dilapidations schedules of dilapidations, schedules of condition, dilaps claims, scott schedules , commercial structural surveys, commercial building surveys, structural reports, engineers reports, specific defects report, structural surveys, home buyers reports or any other property matters please contact 0800 298 5424 for a surveyor to give you a call back.
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