Dilapidations arise normally at the termination of a commercial tenancy and are where the landlord requires the property to be reinstated into the condition specified within the lease.
Potential assignees should be very aware when taking over a lease that they are inheriting any liabilities which would have vested in the previous party. There is an often spoken belief that the condition of the property is judged only from the date an assignee takes possession. This is incorrect as it stems from the commencement of the term.
We would always recommend a survey be carried out prior to entering into a lease commitment as without it a tenant would be unsure of quite what liabilities they may inherit. On many occasions the cost of compliance with a Schedule of Dilapidations can be in excess of £100,000 hence the need of expert advice. The Building Inspection Report can sometimes result in a rent free period being granted to defray the cost of carrying out the necessary repairs which substantially more than covers the cost of a Building Inspection.
Schedules are normally served at or close to the expiry of a tenancy and the tenant is liable to put the property into the state of repair specified in the lease. There are however some complicated exceptions in that the landlord is only entitled to either the cost of carrying out the works or to its loss if the works are not carried out (known as diminution in value of the reversion). There are certain statutory provisions which govern this and the landlord is entitled to the lesser of these two Heads of Claim. If a Schedule is received it is important to take expert advice as many of the items may not be properly recorded and can be challenged and the cost of works can be great. It should also be borne in mind that there is no right to carry out any further repairs after the expiration of the tenancy and all works to put the property in condition must be carried out whilst the tenancy is still in existence.
