Dilapidations are claims made against an outgoing tenant upon the expiry of a lease for that tenant’s breach of covenants in the lease. Usually these are breaches of obligations for repairs that the tenant has failed to deal with.
There are various lease covenants that apply to a tenant’s obligations for dilapidations (for example, a repairing covenant, a decorative covenant and covenants to comply with statute) and most leases will set out a specified standard to which the property must be brought when the tenant relinquishes possession at the end of the term.
It is important that, at the end of any term of occupation, a landlord has his property returned to him in a good state of repair so that he is able to re-let the property at maximum price without an intervening rent-free period which is used to put the property back into an acceptable condition. A landlord doesn’t want to waste time and money redecorating or carrying out structural work at a property, thereby causing him to lose time and money while he or she is dealing with this.
Timing on addressing dilapidations is very important for the landlord, who needs to consider any future plans at an early stage. If he or she wants to sell or re-let the property, then they will need to think about inspecting the property and serving a schedule of dilapidations, sooner rather than later, so that a tenant can start carrying out any necessary work. It will also give the tenant advance notice of what he or she will be expected to deal with before they leave the property, and this may impact on their decision to stay or leave. Alternatively, the landlord has the option of reaching a financial settlement with the tenant in order to retain control of any remedial works.
Alternatively, if a landlord’s intention is to redevelop the property, he or she needs to understand that they cannot claim damages for breach of a repairing covenant if they intend to demolish or substantially alter the property after it is returned to them.
When considering dilapidations, a landlord will not recover every penny he or she expends on the property. There are statutory guidelines providing that damages cannot exceed the difference in the value of the property in its condition at the end of the lease and its value had the tenant observed its repairing obligation.
In the event that agreement cannot be reached as to the extent of the repairing obligations and/or the quantum of the works to be carried out, or where a tenant simply refuses to pay, we can guide you through the pre-action protocol for dealing with dilapidation claims and the subsequent court process that will follow. It is always our preferred option to settle by mediation or other forms of alternative dispute resolution where possible, but if this doesn’t work, we will ensure that your case is properly prepared to maximise your chances of winning at trial.
At Blaser Mills, we have expertise in handling dilapidations claims for both the landlord and the tenant. For the landlord, our objective is to get the property back in the best condition possible. For the exiting tenant, our objective is for him or her to pay as little as possible towards any breaches of covenant that may have occurred, thereby carrying out a damage-limitation exercise. We are experienced in obtaining the best outcome for our commercial clients in the most cost-effective way.
There are practical steps that both landlords and tenants can take to resolve any potential dispute, and our experts at Blaser Mills will advise you on the best strategy to adopt to move things to a swift resolution.