Forming an Exit Strategy to Limit Dilapidations Claims
Looking back to the start of the year, many businesses may have felt that they were in a strong position to move forward; being confident that 2020 was going to be a great year for growth. As the year unfolded, through no fault of their own, these same businesses may now feel very different.
We are already seeing an increase in enquiries in relation commercial property – with tenants looking to end their current agreements, renegotiate or move to smaller properties. Any of these scenarios is likely to involve a dilapidations claim being made against the tenant by the landlord.
Here we provide advice on the ways in which you can limit your liability in relation to dilapidations claims.
If you are considering your options in relation to your existing lease, with a view to exercising a break clause or terminating a lease, seeking early advice from a chartered surveyor would be beneficial. Depending on the state of the property when you took occupancy and its current condition, there may be a significant liability looming.
Our team can assess the areas where repair or rectification are required, advising on a programme of works to address the issues. Our report will identify the areas of greatest concern, giving approximate costs for undertaking works, therefore allowing you to make a plan on how best to tackle to work required. In obtaining this advice, you can also begin to plan for the costs of works.
Just as the economic climate is having an effect on businesses, it is also likely to have a negative impact on landlords, with falls in demand, especially for larger, more lucrative, units. Tenants looking to end their current lease but take up an alternative property (or part of a property) with the same landlord may have a greater negotiating position, with the landlord being able to retain the tenant, albeit paying a lower rent. Although landlords are unlikely to wipe out the outgoing dilapidations claim altogether, there may be some room for looking to reduce it, especially if you have proven to be a reliable tenant in the past.
Defending dilapidations claims
Upon reaching the point where an exit is agreed, a landlord will have an outgoing schedule of dilapidations drawn upon, which forms the basis of a dilapidations claim. In many cases, a Chartered Surveyor is able to get involved with a view to reducing the tenant’s liability. This is achieved through the completion of an assessment of the building’s condition, known as a Scott Schedule, and comparing this to the landlord’s outgoing schedule of condition. In some cases, it is found that a dilapidations claim is exaggerated, excessive or goes beyond the repair liabilities as set out in the lease. In these cases, we can negotiate down the cost of repair works, agreeing a lower settlement figure with the Landlord’s surveyor.
Dilapidations is a specialised field that requires the advice of experienced professionals. The advice we provide is always relevant to the building and to the individual lease and as Chartered Surveyors, both landlords and tenants know that any report or advice we provide meets the strict code of ethics of the RICS.
For advice or assistance in relation to a limiting your liability in relation to a potential dilapidations claim, or one that has already been made against you, please contact us.BACK TO NEWS