Commercial Leases and Dilapidations
Many businesses enter into a commercial lease in relation to business premises. The original lease will have various clauses (that should normally be checked by a solicitor prior to signing) and may well include wording relating to what happens when the lease is terminated. One of the normal clauses relates to the tenant having a responsibility to reinstate the premises to its original condition.
For many this could simply mean some decoration or minor repair work but for others who have made changes, such as partitioning, maybe new lighting, or creating a bespoke retail unit etc. this process can become a little complicated.
Many leases include the right of the landlord to serve a ‘schedule of dilapidations’ once the tenant has served notice. This schedule is normally drawn up by a surveyor and can be served to the former tenant by the landlords solicitors. This can all seem a little overwhelming for the former tenant especially if they have not budgeted for any post termination work.
Normally there are three courses of action available to the tenant. They can simply carry out the work specified in schedule, can pay for the landlord to carry out the work, or simply reimburse the landlord for the cost.
The landlord should serve the former tenant with a schedule of dilapidations within a reasonable time after the end of the lease – which is normally seen as being 56 days.
Dilapidations Disputes
It is possible for there to be a difference of opinion between the landlord and the tenant over the dilapidation schedule. Resolving this amicably is in the interests of both the landlord and the tenant.
Normally a landlord and tenant would meet, possibly with their legal advisors, to try and agree a way forward.
The tenant should respond to the demand within a reasonable time, again normally seen as being 56 days.
If the landlord and the tenant are unable to agree a way forward then they are normally encouraged to look to mediation as a way to resolve their differences.
There is a well recognised protocol for dealing with disputes called ‘The Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy (the ‘Dilapidations Protocol’)’. Further information can be found by clicking here.
Stocktake
If the dispute cannot be resolved through the above steps a ‘stocktake’ is advised where both parties review their positions and see if there is a way forward that does not involve legal action.
If you are a landlord or a tenant requiring advice on a dilapidations dispute please contact us and we will consider your position and guide you through the process and represent your interests in a dispute.