Guarding against dilapidations costs

Guarding against dilapidation costs

Footing a landlord’s dilapidations bill can hit your bottom line hard. Tony Coates, head of the commercial property team at Birchall Blackburn Law, explains how potentially hefty claims arise – and how to minimise them

All too often, the first thing many tenants know about dilapidations is when a claim arrives from the landlord as the lease comes to an end.

The schedule is effectively a list itemising various breaches of the lease, for which the landlord says the tenant should pay.

What you should expect in a dilapidations schedule

The claim will also include a cost attached to each alleged breach, most of which are for repairs, reinstatement and redecoration work. However, claims also include statutory breaches, for example maintaining a current asbestos register and electrical test certificates.

On top of this, the landlord will usually add the cost of professional fees and loss of rent. To put this into a sobering perspective, the initial claim is frequently the equivalent of a year’s rent, or approximately £15 to £20 per square foot of the space you have rented.

Sometimes dilapidations are relatively modest, but taking this for granted is a high-risk strategy.

What you see at first isn’t always what you end up paying

Even so, the initial schedule does not always represent the payment you will ultimately make.

The first thing you should do when you receive a schedule of dilapidations is contact an experienced property lawyer who will organise expert opinion from a surveyor. By taking professional advice at an early stage you can ensure you don’t end up paying for any work that you needn’t.

Well-advised tenants often reduce the landlord’s claims significantly – sometimes to a zero sum – provided they have compelling legal arguments.

Getting a ‘schedule of condition’ before signing your lease

Before signing your lease agreement, it is important to obtain a ‘schedule of condition’ for the premises which can be used as a baseline when the lease ends. Photographs, signed and dated by the tenant and landlord – and referred to in the agreement – represent strong evidence when dealing with the landlord’s dilapidations schedule.

If you have developed a solid relationship with your landlord, the procedure is smoother and less expensive. For example, you can ask the landlord to serve the dilapidations claim to you directly, rather than via a solicitor. This can save hundreds of pounds before you even begin to negotiate.

The schedule of dilapidations might give the appearance of a legally binding document, but it is nothing more than the opinion of your landlord’s surveyor. Your own surveyor can have items changed or completely removed, often covering their own fees as well as adding extra value.

Why it’s good to talk to your landlord

Finally, as in most areas of business management, communication is crucial. Especially during the dilapidations phase, you should talk to your landlord because it’s in both your interests to avoid unwelcome surprises.

For further advice on commercial property leases, call Tony Coates on 01704 215 159.