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Dilapidations and the end of leases

Dilapidations and the end of leases

It is almost impossible to leave premises in absolutely perfect repair at the end of a lease. However the landlord’s bill in response to the dilapidations, or wants of repair, often comes as a shock to tenants.

The good news is that there are legal limits on the amounts a landlord can charge. There is no right to charge dilapidations if the building is about to be demolished, or if any works you do would be made redundant by the landlord’s plans. For example, if you need to leave the building façade in repair, but the landlord would re-render the whole façade in order to re-let the building, the façade repair works shouldn’t be in the schedule of dilapidations. The next step is to consider what, exactly, is meant by “repair”. There is no need to return lifts and air conditioning apparatus with any type of life expectancy, unless the lease expressly requires this. The key to unpicking the types of liability is a careful forensic analysis of the lease and any licences for alterations or schedules of condition.

In addition the Landlord and Tenant Act 1927 imposes a limit on the amount the landlord can charge. If the reduction in the value of the landlord’s interest is different to the cost of the works, the dilapidations bill is capped at the lower of the two.

Your project team should also include a buildings surveyor. He or she can advise on whether the costs estimates suggested by the landlord are fair ones and whether there is a cheaper way of complying with the lease obligations.

If you are following best practice you’ll provide for future dilapidations costs in each year of the lease. Whether or not you do that, it pays to read the first demand with a fine toothcomb.

By Suzanne Gill

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