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BLOG: Commercial Property Tenants – 3 ways to avoid dilapidations claims
In the haste to secure a suitable premises for their business, many business owners overlook the issue of dilapidations. By doing so, ingoing Tenants are putting themselves at significant risk of receiving a dilapidations claim from the Landlord at a later date.
Here are three ways in which you can reduce your exposure to dilapidations claims as an ingoing tenant.
1. Have a Pre-Lease Building Assessment Report prepared
A Pre-Lease Building Assessment Report, completed by a Chartered Building Surveyor, will provide a prospective Tenant with an overview of the building’s condition and suitability and will identify immediate liabilities and expenditure required to upgrade the building and ensure that it is suitable to be occupied. It will also identify likely maintenance and repair works that will be incurred during the proposed term of occupation, and your likely dilapidations obligations at Lease end. Armed with this information, a Tenant (should they not be able to renegotiate – see below) is better positioned to decide whether or not to take up the Lease.
Aspects that are often overlooked by ingoing Tenants are roofs, electrics, heating systems, cladding and asbestos, all of which can be costly later.
2. Renegotiation of the Lease Terms
If a Pre-Lease Building Assessment Report identifies any large areas of concern, it may be possible for the prospective Tenant to return to the Landlord to renegotiate the terms of the Lease. This may involve negotiating some aspects out of the Lease, to significantly limit your liability – sometimes saving thousands of pounds of repair bills that you would otherwise have been liable for. Or, it is sometimes possible to arrange for repair works to be completed by the Landlord before you sign the Lease, or even negotiate an incentive such as a rent free period or a reduced rent.
It is worthy of note that the Solicitor drafting the Lease will not have had the opportunity to visit the premises, and will not have sufficient construction knowledge to predict future dilapidations liabilities. Therefore, our Pre-Lease Assessment Report can be a great advantage in achieving the correct Lease terms to maximise the ingoing Tenant’s protection.
3. Have a Schedule of Condition Report prepared
A Schedule of Condition Report will involve a detailed survey of the building and the production of a photographic and descriptive report that records all pre-existing disrepair. Without this, a Tenant would otherwise inherit responsibility for repairing pre-existing disrepair, even though the damage already existed before they took occupancy.
A Schedule of Condition can also include floor plan layouts to show the existing arrangement at the time of occupancy – so that you cannot be accused of making alterations that already exist.
Without a Schedule of Condition, you will have very little to call upon should you be faced with a dilapidations claim in the future. With a Schedule of Condition report, you can easily evidence the exact state of the building’s repair, therefore reducing or removing any liability.
Dilapidations claims are a good opportunity for Landlords to bring in some significant income and it could leave the Tenant out of pocket! By seeking professional advice, you can be confident that your position is protected and your future liability limited.BACK TO NEWS