The Importance of Dilapidations Assessments during the Term

Many commercial occupiers are unprepared for lease end dilapidations, and often receiving a claim from a landlord can come as a surprise.

M³ Dilapidations Consultancy regularly provide clients with dilapidations advice during the term of their lease. Here we review some of the benefits of a Dilapidations Liability Report (DLR):

1.     Provide time for the business to account for the cost of dilapidations

No business likes an unexpected cost so undertaking a dilapidations assessment during the term provides the business with an accurate cost for accounting purposes. Merely applying a rate per sq.ft to a property or a portfolio of properties can be a risky strategy as no property or lease are the same.

A thorough review of the lease and detailed inspection of the premises are extremely important in order to provide an accurate dilapidations cost for budgeting purposes.

2.     Can raise onerous liability early which may change strategy

In providing a dilapidations assessment the surveyor will undertake a thorough review of the lease documentation and undertake a detailed inspection of the premises.

This will therefore highlight the issues specific to providing a dilapidations assessment cost and any issues that that may impact on strategy.

As an example, leases can have covenants whereby rent is payable for breaches of covenant. Being aware of this during the lease term may mean approaching the landlord early to agree a financial dilapidations settlement or planning ahead to vacate the premises and undertake the dilapidations works in order to avoid paying any additional rent.

3.     Highlight if any works should be undertaken prior to lease expiry

Its common that items can be repaired at a far cheaper cost that replacement. By being proactive it can save thousands of pounds and may also mean you get additional benefit from this whilst still in occupation of the premises.

As an example, a landlord may well replace an old warehouse heater, however, if the tenant can prove the heater has been maintained and is operational with validation certificates, the landlords case for recovering the cost of replacement becomes far weaker.

Another example maybe to undertake roof repair works to mitigate a landlords claim for full roof replacement.

4.     Assists in keeping ahead of the landlord tactically

Time is key in keeping dilapidations costs to a minimum. By our surveyors preparing a dilapidations assessment and reporting on strategy, this puts you ahead of the landlord. Merely waiting for the landlord to serve a schedule of dilapidations is a risky strategy as the landlord may also tactically serve the schedule of dilapidations late when there is no opportunity for the dilapidations works to be undertaken.

5.     Highlight break clause conditions

Break clauses often have conditions attached to them that have to be met in order for the break clause to be successful. From a dilapidations perspective this may mean vacant possession, material compliance or absolute compliance.

Without an early pre planned strategy, the break clause has much higher risk of failure and the lease may continue for a number of years until the next break date or lease expiry.

Becoming aware of this early can change strategy in a number of ways such as trying to agree a financial settlement or acknowledging that the break clause is difficult to comply with and remaining in the premises until lease expiry.

We provide Dilapidations Assessments for a variety of commercial properties types throughout the UK. Should you require any further information then please make contact with us to discuss how we may assist.