What are dilapidations?
- AuthorJagdip Bains
Dilapidations relate to disrepair of properties and simply put are the maintenance and repairs required during and at the end of the lease. The majority of dilapidation claims relate to commercial premises.
Landlords usually seek to enforce the tenants repairing obligations under the lease. Well drafted leases usually have 5 different types of repairing obligations:
- Repairing covenants: To put and keep in good condition and repair
- Decorating covenants: e.g. to decorate the interior of the property every 3 years
- Covenant to yield up : A catch all clause to give vacant possession of the property in a satisfactory condition. When a lease comes to an end, the landlord wants to get its property back from the tenant in the physical condition that it should be in if the tenant has complied with its covenants, without any cost to the landlord
- Alterations and reinstatement: This can be costly if the tenant has carried out extensive alternations. Both the landlord and tenant should consider any licenses for alternations
- Comply with statute and regulation
Tips for Landlords
- Agree the dilapidations and get the cash fast, so you can re-let the premises as quickly as possible. It is important to consider dilapidations throughout the term of the lease. At the break notice stage, rent review stage, when cash flow arises and at termination
- Consider accepting a lower sum if it means that a cash settlement is viable without the need of court costs. This will allow you to re-let the premises, re-establish rental income and reduce your rates liability
Tips for tenants
- If the property is in disrepair before you commence occupation ensure you have a schedule of condition and take advice on the extent of your repairing obligations
- Act early by agreeing a schedule of repair before terminating the lease, carrying out the repairs at your own cost. You are likely to obtain competitive quotes compared to the larger building contractors the landlord is likely to use
- Aim to achieve a quick agreement,but not at any price
- Obtain advice early, do not wait for the schedule of dilapidations
Claims during the tenants occupation
- Claims are usually pursued after the lease has come to an end. If the tenant is financially strong and is solvent there is usually no disadvantage to waiting until the lease has come to an end. If the tenant is in difficulties then the landlord should consider making a claim before the lease has expired.
Remedies available to the landlord in relation to a dilapidations claim:
- Forfeiture: Allows a landlord to terminate the lease if there has been a breach of the lease. The right to forfeit must be expressly set out in the lease.
- Monetary damages
- Specific Performance: If the work required to the property is urgent, landlords should consider a claim forcing the tenant to complete the repairs
- Self help / Entry onto the premises: Modern leases often contain provisions which allow the landlord to enter the property during the term of the lease, carry out any repair works and then recover the costs of doing so from the tenant. The costs of the repairs are usually recovered as a debt.
The choice of remedies available to the landlord are specific to the circumstances. It is important to assess the repairs that are required and obtain early legal advice.
It is important to obtain advice early to consider the extent of any repairing obligations. We often come across liability issues. Is there a signed lease that applies to the occupation. In the absence of a written lease, the repairing obligations are limited. We work closely with building surveyors who we can instruct to inspect the property quickly.
Jagdip Bains has over 12 years experience in advising SMEs on disrepair claims.
For advice and assistance on dilapidation claims please call us on 0800 118 1500