Avoiding dilapidations – top tips for commercial property landlords
Repairs required during or at the end of a tenancy or lease, known as dilapidations, can present serious problems for landlords of commercial property.
Landlords who fail to deal with dilapidations thoroughly can find themselves suffering serious financial implications. Not only do they risk leaving themselves with a property with a depreciated value, they may also finding themselves having to fund several thousands of pounds worth of repair work. In addition to this, it is likely that it will be difficult to re-let premises that are in disrepair, resulting in potential loss of revenue.
Lea Hough’s team of Chartered Surveyors have advised many commercial landlords on how to avoid the pitfalls of dilapidations. Here are some of our top tips…
Cross the t’s and dot the i’s
Having a robust lease in place is essential to protecting yourself against the risk of dilapidations. An experienced commercial property solicitor should be able to advise as to the wording of any such clauses within a lease.
Before the start of the lease, the incoming tenant may take the step of having their surveyor draw up a schedule of condition. A landlord would be advised to have their own surveyor verify and agree the schedule of condition, to ensure it is up to date and gives an accurate account of the property’s layout and state of repair. The Schedule of Condition can then be annexed to the lease for referring back to during and at the end of the lease.
Ensure the property is maintained during the lease term
One of the areas landlords go wrong is not keeping on top of the condition of their properties during their tenant’s leases. A lease can last for several years – during which time a lot of damage can be caused. Undertaking site visits is within a landlord’s rights, so visiting the premises periodically to check on its state of repair can help to avoid an accumulation of damage and disrepair. A landlord may choose to delegate this task to a Chartered Surveyor, who can visit a property and ensure that tenants are carrying out repairs stipulated under the lease.
Do not leave it until the lease is approaching its end – by this point the disrepair could be so bad that repair work will take several weeks, especially if a dilapidations claim has to be made against a tenant. Although this means you will be financially compensated for the cost of work and any loss of revenue in the interim period whilst repairs are being undertaken, such as loss of potential rental income, it is favourable to avoid such a situation, not least because not all dilapidations claims are resolved, resulting in some ending up in court.
Act in plenty of time
Approximately 12 months before the end of a lease, it is likely you will want to appoint a chartered building surveyor to assess the property. Your surveyor will undertake a thorough inspection of the building and determine what repairs need to be completed prior to your tenant’s exit. As well as accounting for the state of the general state of repair, this also includes any alterations that the tenant made to the building that need to be reinstated.
Issuing a dilapidations claim
If the tenant has failed to meet their obligations regarding the property’s state of repair, or has not reinstated alterations, then you should be able to recover the costs of remediation by way of a dilapidations claim. Typically served on an outgoing tenant within the last 12 months of the lease, this will outline all breaches of the repair, redecoration and reinstatement obligations, and stipulate the remedies required. Landlords should expect a response from the tenant to the schedule of dilapidations and quantified demand within 56 days of receipt.
Good advice from a Chartered Surveyor can go a long way to protecting a landlord’s commercial interest in their tenanted property. Lea Hough Chartered Surveyors have many years of experience advising both landlords and tenants of commercial premises.
For further advice, please contact Lea Hough today.