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Dilapidations

7_33_dilapidations.jpg It won’t necessarily be foremost in your relocation considerations, but dilapidations can be a significant and underestimated cost and can take months to resolve without early consideration and planning. Expedite can help you with these issues.

Dilapidations refers to repairs required during the term of the tenancy or when the lease ends. This repairing/ re-instatement liability arises from the lease itself and it means that the tenant is required to return the premises in a fully refurbished open plan condition (often referred to as CAT A), unless the lease states otherwise e.g. against an agreed Schedule Of Condition.

In our experience Landlords and their agents often leave the notification of the dilapidations liability and their estimate for re-instatement until its too late for negotiation or for the tenant to put their own consultants and contractors in place. Equally clients are frequently left with no choice but to pay a disproportionately high ‘penalty’ cash settlement. What tenants are often unaware of is that there is a legal dilapidations protocol which protects both parties but which allows Landlords not only the right to charge tenants a ‘market rate’ (industry schedule of rates are normally much higher than small contractor costs) for the repairs but also loss of earnings (rent) for the time it takes to undertake the works, rates and service charge shortfalls.

When negotiating the lease, we pay close attention to the clauses relating to dilapidations to make sure the repairing liabilities are appropriate and that costs are being kept to a minimum. If the premises you’re signing up for are not in CAT A status, are already fitted out or you sign up for a sub-lease, we would advice to have a Schedule of Condition to be put in place to ensure that the condition of the premises is clearly documented before the start of the lease so there won’t be any discussions regarding this during or at the end of the lease.

During the term of the lease it is important to consider the potential future dilapidations liability, including the costs. It is likely that any alteration works carried out by you, like building meeting rooms, placing a kitchen etc. will be required to be re-instated by the landlord before the lease ends.

As outlined above there are generally two ways of dealing with your dilapidations liability: either you agree a settlement with the Landlord and pay an amount that covers the dilapidations/reinstatement requirements (and often his potential losses of income – rent rates and service charge whilst works are undertaken), or you vacate the premises to allow enough time to carry out the dilapidations works yourself. 

Acting on your behalf we would initially meet with the landlord’s surveyor to discuss the extent of the dilapidations and to establish which route is going to be the most favourable to you. In the first scenario above we would ensure that any negotiated settlement is fair for you – countering any initial proposal from the landlord with estimates of costs from our own consultants and contractors. If you decide that it is more cost effective and beneficial or if the landlord insists on you carrying out the works then our Design and Deliver project team can undertake this for you.

Note: It’s important to document the actual state of the offices prior to signing the lease. Where our clients enter into a Full Repairing and Insuring lease with re-instatement liability we always request a detailed Schedule of Condition so that there is no ‘interpretation’ by the landlord or his representatives on the condition the office was in when you took it over.  

For more information on the Dilapidations, please contact us.


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