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What are commercial property dilapidations?

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Most commercial leases will require the tenant to keep the property in a good condition and to carry out any repairs needed under the terms of the lease. Dilapidations refer to the damages or defects to the property as a result of the tenant breaching the terms of the lease. In most cases, the landlord has the right to make a dilapidations claim, where they will essentially list the property damage and ask the tenant to make the repairs or pay to have them fixed. This can happen at any time during the lease, or indeed at the end of the lease, so it is important to consider ‘dilapidations’ before signing a commercial lease.

Before signing a commercial lease

Before entering into a commercial lease, it is important that both the landlord and the tenant understand the terms of the lease in relation to dilapidations (e.g. interior decoration or structural maintenance) and, if needed, the terms are negotiated to better suit the tenant or landlord. This will mean that there can be no misunderstandings from the outset.

At the end of a commercial lease, the landlord is entitled to claim for the cost of the repairs that the tenant did not carry out and the loss of rent for the period of time needed to get the repairs fixed. This can result in a hefty bill, particularly if the tenant is liable for structural repairs as well as the decoration of the interior. Therefore, it is important that the tenant understands their dilapidations liability and that the landlord is comfortable that the tenant is able to afford any repairs to the property for the duration of the lease.

Schedule of Condition

It is vitally important that the tenant inspects the property before signing anything to ensure that the landlord’s description of the property matches the reality – i.e. the landlord has not said that the property is in a good state of repair when it actually isn’t.

The tenant can get a ‘Schedule of Condition’ from a surveyor, which contains photos and a narrative of the property to support their findings. This can help stop the tenant from signing a lease for a property that is in disrepair or to support any future dilapidations claims. Where a property is not in a good state of repair a tenant should ask for the Schedule of Condition to be attached to the lease and the repairing condition to be limited so that there is no obligation to put the property in a better state of repair than the Schedule evidences.

If you’re not sure how to negotiate the terms of the lease, then it is invaluable to seek independent legal advice.

Doing work to commercial property

It is very important that before the tenant carries out any work or alterations to the property that they check that they are allowed to do so under the terms of the lease. Some leases require the tenant to get permission from the landlord first, or that upon approval, the tenant must restore the property to its previous state at the end of the lease. A tenant may think that they are adding value to the property by making alterations to it, however removing or repairing alterations can be included as part of a dilapidations claim.

Schedule of Dilapidations

If the landlord believes that the tenant has breached the terms of the lease in relation to maintenance and repairs, then they have the right to make a dilapidations claim against their tenant. It is advisable for landlords to have a legal advisor review the terms of the lease in relation to dilapidations and to instruct a surveyor to assess the property and make a list of any repairs needed, called a schedule of dilapidations.

Once the tenant receives the schedule of dilapidations, they may seek advice from a separate surveyor who can check the list and prepare an itemised response to the landlord’s claim. The tenant will usually only have a limited amount of time to respond to this. The surveyor may even be able to negotiate a reduction in the amount that the landlord is claiming. If the landlord and tenant still can’t come to an agreement, then they may seek advice from a specialist in dispute resolution such as a solicitor or the RICS Dispute Resolution Service. This area of commercial property law is complex and difficult to navigate, so it’s important to seek legal advice.

Get expert advice on landlord and tenant disputes

If you’re either a landlord or tenant of a commercial property and would like some advice on dilapidations or any other landlord and tenant dispute, then get in touch with Bird & Co today. Our specialist Commercial Property lawyers can help you navigate your commercial lease and ensure that you get a satisfying outcome. For enquiries call 01476 372 041 or fill in our form to the right of this page.

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