When you sign a lease for a commercial property, you are automatically taking on a risk of dilapidations liability. This liability can be substantial and has the potential to increase over time.
Here are four areas of liability to consider.
Repair obligations usually represent the largest risk when taking on a commercial lease. Tenants do not always realise that as well as the upkeep of the internal aspects of a property, they also become responsible for maintaining the structure of the building. This means that if the roof falls into disrepair whilst you’re a tenant, it will be your responsibility to pay for a new one!
Tip: To reduce the risk of significant unforeseen repair costs, you should establish the state of the building’s repair before you take occupancy. This can be done by instructing a Pre-Lease Assessment or a Schedule of Condition. If any serious concerns are identified by a Chartered Building Surveyor, you should aim to get the landlord to undertake the repair works before you move in.
When the time comes to exit the property, the terms of a lease will usually dictate that any alterations you have made will need to be reversed and the property returned to its original state.
Tip: If alterations that you have made add value to the property, a Landlord may take the view that it would be unreasonable to ask for reinstatement. Before making any significant changes to a property’s layout it may be worth consulting the Landlord, obtain consent and to try and establish whether you will become liable for reversing the works down the line.
On signing a full repairing lease (FRI), the tenant becomes responsible for ensuring the building complies with all relevant legislation. This covers building regulations, asbestos legislation and up to date safety certificates for electric, gas and fire.
Tip: At the end of a lease term, the building owner may ask for proof that compliance obligations have been met. We encourage tenants to keep up to date throughout the term and it is good practice to maintain records throughout the term.
In addition to repairs, a tenant is responsible for the general upkeep of a property. This includes cleaning and decorating. At the very least, a property needs to be cleaned and decorated to a reasonable standard prior to the end of a lease.
Tip: Although they will rarely do so, a property Landlord usually has the right to enter a property and inspect it. If they deem the upkeep unacceptable, it is possible for them to seek redress and pass the costs of this on to the tenant. The same applies at any break clauses contained in the lease or upon the tenancy ending.
Seeking the advice of a Chartered Building Surveyor is always sensible before taking on the onerous obligations of a commercial property lease. For further advice on our services for commercial tenants, including Pre-Lease Assessments, Schedules of Condition or defending a Dilapidations claim, please contact us.