A dilapidations payment is usually required at the end of the lease to cover any breaches of the tenant's covenants relating to the physical state of the premises. This includes any repair covenants, decorating covenants, covenants to comply with statutes and any covenants relating to how the tenant is required to leave the premises. The whole idea of the dilapidations payment is to ensure that the landlord receives the premises in the same condition as at the start of the lease.
Before you enter into the lease:
Before entering into a lease you should carefully review the terms of the lease to understand the obligations you are undertaking to fulfil for the duration of the tem of the lease. This is particularly significant where you are taking on a premises which already requires a significant amount of work to be undertaken to make it habitable. The best way to limit your potential dilapidations costs at the end of the lease is to have a surveyor prepare a Schedule of Condition before signing the lease. The SOC will provide written and photographic evidence of the condition of the premises at the time the lease was entered into therefore providing an objective standard against which to compare the state of the premises at the end of the lease.
During the term of the lease:
The easiest way to avoid a heavy dilapidations bill is to ensure that you are complying with the terms of the lease throughout the term. However if you let things slip you may be served with a Repairs Notice which allows the Landlord to enforce covenants during the term of the lease. If the tenant does not undertake the works stated in the notice usually within 2 or 3 months then the Landlord is entitled to re-enter the property and carry out the works himself. The landlord can then recover the cost of the works from the tenant as a debt. This can be costly as the tenant has no control as to the contractors used to undertake the works which could be sourced cheaper by the tenant.
After the lease term:
It is important to consider the options available to a tenant a few months prior to the end of the lease to assess whether it is more beneficial to undertake the works themselves or vacate the premises at the end of the term and wait for the landlord to undertake the work and receive a bill following the completion of the works.
The tenant may be able to reduce the cost of the dilapidations works by completing the works themselves however the downside of this is that the tenant would usually be required to vacate the premises early to commence the works. Alternatively the landlord can undertake the works which will allow the tenant to remain in the premises for the full term however this is likely to incur additional costs such as fees incurred, loss of rent and business rates for the length of time the works are likely to take.
Ultimately there are several things the tenant can do before, during and after the term of the lease which can reduce the overall cost of the dilapidations at the end of the term. It is always advisable to seek professional help when considering the potential dilapidation liability.
The information contained in this article is for information purposes only and is not intended to constitute legal advice. If you require further information our commercial property team would be more than happy to assist you. Please contact us at email@example.com or call us on 029 2009 5500 to speak to one of our team.