What do Tenants Need To Know About Dilapidations?

There are lots of considerations to make when signing a Commercial Property Tenancy agreement. You will no doubt be focused on moving in, but your mind should, perhaps, be on moving out too.

There will be terms in all reputable tenancy contracts that refer to dilapidations at the end of any lease period. As we provide a range of professional dilapidation services, we have prepared this short guide to help you avoid surprises down the line.

What Are Dilapidations?

Dilapidations are described in the 1927 Landlord and Tenant Act. They refer to the damage, wear and tear, deterioration and other changes that occur during a tenant’s occupation.

The law states landlords must receive a property back in its original condition. As this is rarely possible, landlords are compensated financially instead.

Many times this will run smoothly with dilapidation costs agreed and settled relatively easily. However it is in a landlord’s interests to maximise any claim and, if you’re a tenant, your best interests are served by minimising those costs. This is where conflict can arise.

The Importance Of Dilapidations As A Tenant

Before You Sign A Lease

Your first step is to record the property’s state of repair. Arranging your own independent survey will give you the best, most accurate picture. Any savings you might get from moving into a property in poor condition may prove a false economy. The landlord may try and charge you for repairs at the end of the tenancy in any case. It is important you take this into account when offered any discounts or rent-free periods to tempt you.

It is also important to consider any alterations you might want to make. Even if you view them as improvements, the landlord will consider them dilapidations. They will require compensation to return the property to its original condition. Again, it’s worth checking that any plans represent value for money over the whole lease period including any final settlement.

The focus of surveyor and property consultant dilapidation services for tenants is often the end of the lease. It might well pay to get independent advice before signing on the dotted line too.

During Your Lease

We suggest maintaining healthy proactive relations with your landlord. This avoids dilapidations becoming a matter solely at the end of a contract and helps prevent conflict and dispute.

After The Lease

When you have left the premises, your landlord will re-assess the property. They will complete the Schedule of Dilapidations and collate the final dilapidations costs. This will form their final claim.

As well as structural repairs, decoration and maintenance, dilapidations may include compensation for loss of rental income and professional fees.

Any documentation should list each item in detail and provide sufficient information for scrutiny.

You do not have to accept this figure. Most commercial tenants ask surveyors and property consultants to get advice at this point, if not before. They can assess the claim and help with a counterclaim if it is deemed necessary.

Any counterclaim needs to be made in a timely fashion. This is typically within 56 days. It needs to provide a similar detailed breakdown of work and costs. If an agreement is not reached, the claim is considered in dispute.

Understanding The Dilapidations Protocol

The Protocol specifically includes guidance for tenants and their representatives. Amongst its measures, it suggests parties consider Alternative Dispute Resolution (ADR) procedures before litigation.

Common Areas Of Dispute

A landlord is likely to issue a schedule of required dilapidation repairs when you leave the property. This will form the basis of any dilapidation claims.

Typical disputes, at this stage, include the following.

In our experience dilapidation disputes can be avoided. Planning ahead and taking a calm pragmatic approach to negotiation will help. An independent survey is often the best place to start.

What To Do If You Receive a Dilapidations Claim

The first step is to review your dilapidations claim against the relevant clauses in your lease. Has your landlord stuck to their side of the bargain contractually?

It is then a question of assessing whether you agree with their assessment of the issues. If you agree, then you will either settle up the financial claim or agree to undertake work yourself.

If there’s disagreement, you can reply to their claim with your own information. At Fresson & Tee we have a wealth of experience helping tenants. We can help with the challenge of countering landlord claims and reducing tenants dilapidations costs. We would be delighted to help you.

If you would like to discuss your dilapidation requirements further, please call our office on 020 7391 7100 or email us at surveyor@fandt.com.

A Beginner’s Guide to Dilapidations Costs

If you have signed a commercial lease it will include clauses related to the tenant’s obligations. These will include returning the property to its original condition when they move out. Rather than do the work themselves, most tenants pay the landlord for any required work. The term “dilapidations” is used to describe this process.

The dilapidation costs process is well established. It allows landlords and tenants to end a lease fairly and transparently. The key to success is agreeing on the amount of compensation a landlord is due for damage, wear and tear or other changes that have occurred over the lease period.

What Are Dilapidations?

One way to view dilapidations is the ‘exit costs’ for any leased building. It costs to restore the property to its original state for the next tenant. The dilapidation process allows landlords to be fairly compensated.

Dilapidations typically include repairs and redecoration. They are also likely to include tenant signage, partitioning, cabling, carpeting and fitted furniture. According to UK Law, dilapidation costs cover all that is required for a commercial landlord to return the property to a lettable state.

Opinion, of course, varies here between landlords and tenants. The former will look to maximise their claim while tenants will wish to minimise their costs. This is why establishing costs usually requires the expertise of independent Dilapidations professionals.

What Is Included In Dilapidation Costs?

The Law does not define dilapidations in detail. It is important, therefore, to check how they are defined in any signed lease document before moving forward. Based on our experience, however, we have collated the following list of items normally considered.

Property and office dilapidation costs can also compensate landlords for the following

The detail should be defined in your lease document. If it’s not, it is probably useful to talk to an expert before you enter into negotiations.

How Can You Estimate The Cost Of Repairs and Restoration?

The Protocol was published by the Property Litigation Association in 2002. A second edition was issued in 2006. From 2008 to 2011 the Association and the Royal Institution of Chartered Surveyors (RICS) partnered with the Civil Justice Council to refine the document’s wording. The Protocol was fully adopted in 2012.

The protocol mandates landlords and tenants both employ professionals to estimate dilapidation costs. In cases where agreement seems impossible, a third independent survey should be used to establish costs.

What Factors Influence The Final Dilapidations Outcome?

Disputes can be avoided by following the Royal Institution of Chartered Surveyors (RICS) Guidance Notes.

They provide governance on the following issues.

Following the above guidance makes it more likely dilapidation cost estimates will be accepted without dispute.

When To Call In A Professional For Dilapidations?

If you are a landlord, we would recommend an independent Chartered Surveyor supports your initial dilapidations estimate.

A tenant is likely to question details from elsewhere. If you accept a landlord’s dilapidation claim as a tenant there is no need to engage with third parties.

However, if you wish to challenge the cost estimate you will need to talk to a surveyor of your own.

Fresson & Tee has a wealth of experience working on behalf of landlords and tenants. We are experts in all aspects of dilapidations and can provide accurate cost estimations as well as advice on repair and rectification works themselves.

If you would like to discuss your dilapidation requirements further, please call our office on 020 7391 7100 or email us at surveyor@fandt.com.