What are leasehold dilapidations?
Metcalfe Briggs Surveyors assists clients in leasehold dilapidations matters throughout Kent and London.
The following information describes leasehold dilapidations from the landlord or the tenant/leaseholder perspective. It highlights the work of a Chartered Building Surveyor in facilitating the process.
As a landlord:
Commercial leases contain repairing covenants which require the tenant to keep the leased property in repair. This may include only the interior for an internal repairing lease or the interior, exterior, structure, services and grounds for a full repairing lease.
Leaseholders often do not fulfill these obligations and need to be reminded during the term of the lease. In particular, during the last year of the term, the lease needs to be enforced by the serving of a Schedule of Dilapidations. A Chartered Building Surveyor prepares this document, reading and interpreting the lease, visiting the premises to survey its condition and making a detailed report to a recognised format and standard; the Schedule of Dilapidations.
If the tenant still does not fulfill its obligations and vacates at the end of the lease, leaving the property in disrepair, then there is a need to negotiate financial compensation for the landlord. This will include the cost of the necessary work, professional fees associated with it, professional fees for preparing the Schedule of Dilapidations and negotiating the settlement and associated legal fees. It may also include loss of rent, loss of rates and service charge etc for a period during which the property is un-lettable due to its condition. Using a wealth of experience Metcalfe Briggs Surveyors can inform this process, driving it forwards using a detailed and business focused approach so that the landlord receives appropriate compensation having considered all factors.
A wise landlord will take advice on dilapidations well in advance of expiry of the lease so that he may plan his strategy depending on his future intentions and whether or not he wishes the leaseholder to undertake the work or vacate and negotiate financial settlement.
As a tenant / leaseholder:
If a full repairing lease has been agreed then at the end of its term there may be significant financial implications due to dilapidations. It is vital to consider dilapidations well in advance of expiry of the lease so that a coherent strategy can be determined which may involve undertaking the necessary work. This is better progressed in co-operation with the landlord so that there is no disagreement as to whether the completed works comply with the lease or not.
A leaseholder may decide to do no work and to reach financial settlement in lieu, but this needs to be planned carefully and will depend on whether or not the landlord has any intention to re-develop the building, substantially refurbish it or change its use which may render the claim for dilapidations null and void.
Under any circumstances it is recommended that a Chartered Building Surveyor is contacted for advice. A Building Surveyor is able to advise on the extent of repairs that will be required under the terms of the lease. If a Schedule of Dilapidations has been served by a landlord a Building Surveyor can evaluate its validity, enter into negotiations and provide advice on the best course of leaseholder action. There have been occasions where this has resulted in significant savings.
The best time to make sure unexpected liabilities are avoided is during the negotiations before signing a lease. This is often an overlooked point but can result in very expensive consequences at the end of a lease. Metcalfe Briggs Surveyors assists clients through this process, visiting the prospective buildings and evaluating their condition from which expensive liabilities might arise years later. Using this information coupled with Metcalfe Briggs Surveyors' experiences can help realistic drafting of repair liabilities lease clauses and will calculate repair related figures for the business to budget for in future years.
Sources of Professional Advice:
Whether a landlord or tenant/leaseholder, in the first instance a Chartered Building Surveyor is best placed to advise you and will need to read the lease and survey the building. It is vital that a Building Surveyor is selected who is experienced in the current practice of dilapidations, the Civil Procedure Rules (CPR), the pre-action protocol and the relevant case law.
In all but the simplest cases the Building Surveyor will need to work closely with an experienced dilapidations solicitor to ensure that the client’s interests, be they landlord or tenant, can best be protected.
At Metcalfe Briggs Surveyors we take responsibility for an end to end solution to your dilapidations support needs.
If you would like to speak to us regarding a dilapidations matter, please do not hesitate to contact us.