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Mitigating Dilapidations

Ignoring dilapidations can be a costly mistake – as a commercial Tenant you are highly likely to have an obligation from day one under the terms of your Lease or Tenancy agreement.

The key steps to mitigating a dilapidations claims are:

  • Understanding your lease obligations and liabilities.
  • Preparing for lease breaks and end of tenancy.

With dilapidations, timing is everything in terms of financial impact and minimising disruption to your business.

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During the Lease Term

  • Landlords should consider issuing an Interim Schedule of Dilapidations particularly if they are concerned about Tenant breaches which affect the value of their property.
  • Landlords should also consider their right to enter and inspect premises and to serve a Repairs Notice on a Tenant where they have identified a breach of lease covenants, including identifying the extent of the breaches.

Key timescales for a lease break or expiry:

Signing of the lease to 24 months prior to expiry.

  • Have you asked a chartered surveyor to assess the dilapidations liability so that you satisfy current accountancy standards and accrue funds within the business accounts?
  • Will you remain in the building or relocate?

At 18 months

  • Have you made your decision to move or to remain in occupation?
  • What is the minimum amount of work you need to undertake?
  • Have you accrued for this?
  • If you are exercising a break option, what are the conditions of the break?

At 12 months

  • Within the final twelve months a Landlord can legitimately issue their claim for terminal dilapidations, however they may choose to delay until there is insufficient time for the Tenant to undertake work.
  • A Tenant can also request the Terminal Schedule of Dilapidations from the landlord, the Landlord however does not have to comply with that request.
  • What is the minimum scope of work required under the terms of the lease?
  • What standard of work is required by the lease?
  • Will the landlord discuss a cash settlement instead of you doing the work?
  • Can you comply with the break clause conditions?

At 6 months

  • Has your landlord served a Schedule of Dilapidations?
  • Will this be delayed for tactical reasons?
  • There is still time to mitigate your dilapidations liability.

At 3 months

  • Is it already too late? No.
  • However, by this stage, if the dilapidation issues have not been identified or remedied, tactically the upper hand shifts to the Landlord.
  • The timescale for completing the necessary work could have passed.
  • A Landlord may still agree to a “deal”, but it could well be at a cost higher than if the Tenant had dealt with the issues earlier.

To get professional, independent advice, without obligation, please contact us today.