Avoiding dilapidations

Not all tenants of commercial property have a full understanding of their repair obligations and are often therefore in for a nasty shock when it comes to exiting the property.  Here we look at some of the most commonly held beliefs that tenants have around leasing commercial property – dispelling some of the myths around the area of dilapidations.

Our repair obligations only extend to the property’s interior

Tenants may be aware that they are responsible for the upkeep of the property’s general state of repair and for leaving it in at least the same standard as when they took occupancy. Not all tenants will realise the extent to which their obligations extend – which may also include any external grounds, car parks, the roof of the property, heating systems, etc.

Some landlords may share some maintenance or repair costs with their tenant in order to keep the property in a good general condition. However, this is not always the case, and under the terms of a lease, repair obligations will likely fall to the tenant.

Dilapidations only apply at the end of a tenancy

Dilapidations are largely associated with the end of tenancies (Terminal Schedule of Dilapidations), but the majority of leases will also allow for Interim Schedules of Dilapidations. Tenants can be caught unawares by this should their landlord choose to enact this right, often placing them under a large amount of financial pressure to pay for repairs when they do not expect to.

Tenants should be mindful of whether an Interim Schedule of Dilapidations is a possibility under the terms of their lease and ideally, should have a proactive stance on ensuring that repairs are tackled as and when problems arise, and that the general upkeep of the property is maintained.

The property was in this state when we took occupancy, so we’re not liable to return it in a better condition

This depends on the wording of the covenants or lease. Some leases may use wording such as ‘a good and tenantable condition’, or ‘to put and keep in good repair’, which could leave the outgoing tenant liable for repairs and redecoration that go over and above the original state of the property.

Other leases may require the property to be returned to the same state of repair as at the time of taking occupancy. In this case, it may become necessary for the tenant to provide evidence to support their dilapidations defence. Ideally, a Schedule of Condition would have been prepared before the official start of the tenancy, providing a detailed description and photographs of the property and its state of repair at that time.

Any alterations will need to be removed / returned to their original state

Companies that are in a commercial property for a number of years may well feel the need to make amendments to the internal layout in order to better meet their everyday needs. At the time of leaving the property, there may be a question as to whether or not the property needs to be returned to its original layout, which would of course come at a cost to the outgoing tenant. If it can be deemed that the alterations are of benefit to the property, it may be that the alterations can remain in place. A tenant would be wise to speak to their landlord prior to making such alterations to try and clarify their position, or to put a Licence to Alter in place.

Having a clear understanding of any dilapidations clauses in a lease and taking appropriate professional advice right from the very beginning goes a long way to ensuring a smooth exit from a commercial property. 

In the event that a dilapidations claim has been served, Lea Hough are able to advise outgoing tenants on the next steps to take. Our team are specialists in acting on behalf of outgoing tenants, assisting them to defend dilapidations claims and negotiating full and final monetary settlements. Please get in touch to discuss our dilapidations services in more detail.

Preston Office
Telephone: 01772 458866
Blackburn Office
Telephone: 01254 260196
Clitheroe Office
Telephone: 01200 320040
Lancaster Office
Telephone: 01524 899850
Lea Hough is a trading name of Lea Hough & Co LLP, which is a Limited Liability Partnership registered in England and Wales under partnership number OC306054.
Registered Office: 7 Ferry Road, Office Park, Preston, PR2 2YH.