Managing the dilapidations risk

A tenant in a commercial property will have obligations to make sure its condition is maintained throughout the tenancy.

In theory, this should mean the property is handed back to the landlord in the condition it was in at the start. But not every tenancy, and every landlord/tenant relationship, runs without a hitch. Disagreements over repair obligations and ‘dilapidations’ are unfortunately all too common.

What are dilapidations?

These are repairs that the landlord says are needed at the end of the tenancy and for which the tenant is responsible. The landlord will usually have inspected the property and perhaps commissioned a surveyor’s report to establish the extent and cost of the remedial work.

Dilapidations are something of a safety net for landlords. If the tenant hasn’t complied with the repair and maintenance terms in the lease over the course of the tenancy, the landlord can serve a ‘Schedule of Dilapidations’ setting out what the tenant must do to put this right. Tenants need to understand the risk of a potentially significant expense, and how they should prepare for and mitigate that.

When should tenants start thinking about dilapidations?

Repair and maintenance obligations should be on a tenant’s mind from the moment they consider taking a lease on a premises. It’s vitally important to understand what these obligations may be in the context of the property they’re looking to occupy. Are the repair obligations fair? Is the required maintenance too onerous?

A tenant should fully assess the property’s condition, with the help of a surveyor, before committing to anything. The surveyor will be able to pinpoint any issues that could need rectifying immediately, or during the tenancy and to bring these up with the landlord. It can be a good idea to incorporate  photographs of the property’s condition into the lease so these can be referred to later on if need be.  

Can tenants challenge the terms of the lease?

While it may seem as though the landlord holds all the cards, the process of agreeing a lease is a negotiation. A tenant should seriously consider pushing back on things they’re not comfortable with – repair obligations being a significant consideration. Setting clear responsibilities at the outset, and reducing liability for repairs where possible, is essential.

How can tenants manage the risk of liability for dilapidations?

Scheduling regular maintenance periods means a tenant will keep on top of the decorating and repairs that may be needed. Landlords will  typically check-in periodically to see that the property is being taken care of, and so having a plan in place to address issues should keep the landlord/tenant relationship on track, as well as reducing the chance of some enforcement action. It’s also wise to schedule a repairs review date before the end of the tenancy, giving plenty of time to put things right and avoid (or budget for) dilapidations.

Can a tenant challenge the Schedule of Dilapidations?

Absolutely. If you have been sent one of these, speak to one of our specialist commercial property solicitors as soon as possible. They’ll advise you on anything that doesn’t look quite right and may be able to help you reduce your liability. 

For advice about the terms of an existing lease, a lease you’re considering entering into, or anything else commercial property-related, contact our team on info@bsandi.co.uk or call 01264 353411.