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ReLease @ AHBSS What are dilapidations? When you first lease a business premises there will be contract terms set out between the landlord and the tenant. These are the lease clauses. These clauses include the tenant’s obligation to decorate, keeping the premises in repair, putting the premises in repair, cleaning, maintaining the premises and procedures for allowing alterations to the premises. A failure to comply with the above clauses either during the term (interim dilapidations) or more regularly at the end of the lease will result in a dilapidations liability – and the landlord will either seek damages or will wish to take possession of the premises to a lettable standard. At the end of the lease your landlord will often employ a specialist Building Surveyor who, acting for the landlord, will professionally and impartially undertake a survey of the soon to be vacated premises and will check for breaches of the above obligations and prepare a schedule of dilapidations establishing what works are required to comply with the lease terms. The schedule of dilapidation will be a costed schedule listing all decoration, cleaning, repairs and rectifying any modification to put the property back to it’s original condition (or better) and layout. Included in the Dilapidation Schedule: Decoration – Generally, there is a clause in the lease that the premises have to be decorated internally at 5 yearly intervals, 3 years externally and at the end of the lease. You will, usually find a full internal and external decoration item in the schedule of dilapidations. Repairs – These include the cost of maintaining and keeping the premises in good condition. They may also include putting right any inherent building defects, which become evident during the lease period. You will usually find that all repairs are included in the end of terminal dilapidations, such as plaster repairs, joinery repairs, suspended ceiling tile repairs, electrical test certificates and bringing the electrics up to current regulations. It may also include floor replacement (sulphate attack), damp repairs, rainwater good repairs and even full roof recovering. In most cases carpets are renewed throughout. Reinstatement – It is usual for the tenant to be responsible to re-instate the premises to the original configuration. This may include rebuilding walls, removing portioning walls and reception areas, removing signage and lighting, removing data cabling, air conditioning units and other improvements. Break Clauses – The lease may end by natural expiration or may be via a break clause or option in the lease. In many cases a beak option may incur additional charges for consequential loss. ReLease @ AHBSS has been recently established to assist The Tenant faced with the end of a lease of a break clause. The landlords always appears to have an army of experts, solicitors and surveyors seeking damages from the tenant. The landlord and the tenant have diametrically opposed objectives at end of lease. Whilst the surveyor should act impartially, he is acting for the landlord whilst the tenant will be paying for his services in the dilapidation charges. What the tenant needs is to terminate the lease with the least cost and inconvenience to himself. How does ReLease @ AHBSS help? In the first instance ReLease @ AHBSS visits your premises and assesses the best and worst case scenario to manage the end of lease. With years of experience we survey the premises and prepare a draft Schedule of dilapidations, with everything the landlord could consider to be a breach and the minimum we feel could be done at the end of lease. We also check the terms for penalty clauses for late handover of premises etc. Therefore the tenants has no ‘nasty’ surprises. Armed with information, we can prepare a repair schedule in the latter weeks of the tenancy, obtain competitive tenders with expert contractors and oversee the work. You have a ‘one person contact’ project managed service. ReLease @ AHBSS can then negotiate with your landlords surveyor for final settlement. The tenant may choose to do no repair and wait for the Landlord’s surveyor’s schedule of dilapidations. ReLease @ AHBSS will help negotiate a final settlement. Summary A proactive approach by the tenant can save thousands of pounds at the end of the lease. In order to best meet the needs of the tenants AHBSS has set up for 2010, ReLease @ AHBSS linked with partnering contractors, we specialise in assisting tenants in landlord and tenant’s disputes and negotiating fair dilapidations. ReLease @ AHBSS experts can help you to minimise your costs with a strategy for compliance. Contract arrangements with specialist contractors allow ReLease @ AHBSS to organise a fast and cost effective solution. Case Studies Case Study 1 2009 Small commercial premises in East end of Newcastle, the tenants were retiring and wanted to end lease by mutual agreement with the landlord. Unexpectedly, a Schedule of Dilapidations was served for £30,000. AHBSS investigated and found that the premises was undergoing a change of use and negotiated the claim down due to much of the works being unnecessary and unenforceable. Case study 2 2009 Medium sized office in Team Valley at end of lease. Penalty clause if property not handed over was 5 years rent. AHBSS was involved when the landlord’s surveyor served a schedule of dilapidation for £45,000. AHBSS prepared a schedule of repairs, obtained tenders and appointed a specialist contractor. The works were complete with 24 hours to spare and the full cost of repair and AHBSS fees - £24,000. A saving of £21,000. Case study 3 2009 Single floor on multi storey block in Newcastle. 14 months lease terminated. Schedule of dilapidations was £58,607.83 plus VAT Total £67,399.00 we negotiated the settlement @ £35,212.44 plus VAT, Total £40,494.31. A saving of £26,904.69 inclusive of VAT. Case study 4 2009 Single floor on multi storey block in Leeds. 14 months lease terminated. Schedule of dilapidations was circa £36,000 we negotiated the settlement @ circa £14,000. A saving of £22,000.
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