Almost all commercial leases provide that the tenant must decorate, repair and yield up a property in such good condition regardless of its original condition. The lease will usually also provide that the tenant must remove any alterations made at the lease end. Failure to comply with these lease terms will enable the landlord to bring a claim for dilapidations which will usually include damages equal to the cost of the works required but could include the cost of rent for the period of the works, business rates, service charges as well as professional fees. The result can often be a claim which exceeds by some margin the annual cost of rent under the expired lease.
The extent of the possible claim will be made clear in the terms of the lease, unfortunately many prospective tenants are unaware that they could be facing such a liability at the lease end when they sign the lease, either because their solicitor did not advise them or because they were in a hurry to get moved in. Whatever the reason they undoubtedly come to regret it at a later stage when they receive a substantial dilapidations claim.
As a consequence and in order to avoid a potentially costly and time consuming claim, it is advisable for a prospective tenant to have a survey carried out at an early stage by someone who can advise on the full meaning and effect of lease clauses and can provide advice during negotiations of what limitations should be put in place. They could for instance justify that lease terms be renegotiated based upon the condition of the building so that the tenant covenants to only yield up the property in no better repair than existed at the commencement date of the lease (evidenced by a full schedule of condition annexed to the lease). In some instances it may be appropriate to remove liability for an element of the building altogether such as, say, an asbestos cement roof on an industrial building.
When seeking advice it is important that the survey is carried out by someone experienced with Dilapidations so that they can foresee where a potential claim might lie and advise how best to avoid it at the outset. Without this knowledge a tenant could be advised of the condition of the building but not the potential implications this may have in five, 10 or 15 years time when the lease expires.
For further information and advice contact Owen Flack.