What are Dilapidations?
Dilapidations are often defined as being “items in need of repair to comply with a tenant’s obligations both to repair the property and to return the property to the landlord in accordance with the lease”.
Most commercial leases will describe this as a requirement to keep the property in good repair and condition throughout the term of the lease.
Why Does It Matter?
A landlord will be been keen to make sure that the property is managed properly and that, come the end of the lease term, the property is in the same condition as at the start of the lease. Otherwise, the landlord may struggle to find a subsequent tenant or may not be able to achieve enough rent. It is for this reason that the landlord will want to include within the lease a requirement for the tenant to keep the property in good repair and condition.
If the landlord is unable to let the property after the end of the term due to the tenant having failed to comply with its repairing obligations then the tenant may face a claim from the landlord for breach of contract.
What Should a Prospective Tenant Consider?
When acquiring property, either under a new lease or by taking an assignment of an existing lease, it is essential that a tenant obtains proper advice. In order to reduce the risk of a potential claim at the end of the term it would be prudent to consider the following at the outset:
- Potential costs – Ensure that financial provision is made. This may involve getting a survey commissioned by a surveyor in order that the potential costs are properly assessed.
- A detailed schedule of condition – This should be appended to the lease and should set out the condition of the property at the start of the lease, thereby limiting the extent of work that can be claimed by the landlord to be required to put the property right at the end of the term.
- Items already in disrepair – Despite the inclusion of a schedule of condition, certain items of disrepair which pre-exist the lease cannot be ignored for the duration of the term. In these circumstances the tenant would be better placed by taking a capital incentive from the landlord or insisting that the landlord puts the property into good repair before the lease is signed.
If these issues are identified and dealt with there is one less reason for cracks to form in the relationship between landlord and tenant.
Commercial Property Department