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Dilapidations – Occupiers

Senior Associate John MacMillan discusses the issues facing Tenants upon vacating leasehold commercial property.

Failure to fully understand repairing obligations in a lease gives rise to dilapidations, which can result in difficult and often long winded disputes between Landlords and Tenants. Such disputes are rife, with over-zealous landlords claims and tenants often not fully aware of what they have signed up to.

The principle of buyer beware holds as true for leases as for any other purchase. Occupiers should familiarise themselves with the repairing obligations under the lease and, as far as possible limit their obligations prior to signing the lease. Repairing liability can be reduced by reference to a Schedule of Condition stating that you will not be obligated to return the premises in any better condition at lease end than when you took it.

Negotiating dilapidations at the end of a lease is invariably an adversarial process so developing a strategy for a proactive approach to managing a potential claim, including opening early dialogue with the landlord can help ensure a smooth exit at lease end.

At lease end, an occupier will need to;

  • Determine what repairs are necessary and how they can be implemented in the lead up to exit.
  • Understand what the landlord wants done with any alterations made to the premises and whether they need to be reinstated
  • Check what needs to be decorated and to what standard
  • Assess whether a defence exists with regard to the diminution in the value of the landlords reversion (Section 18 of the Landlord & Tenant Act 1927)

Our dilapidations team provide commercially aware advice to get you the best outcome.

And remember, if you do not appoint somebody savvy maybe the other party will, and that could leave you out of pocket.