Agree and Close
Tips for minimising dilapidations claims at lease expiry
16th January, 2019
Many tenants approaching the end of their commercial leases are overwhelmed by the sudden realisation that they have to repair the premises before leaving. This sudden cost can be financially very expensive – so here are 5 tips for ensuring that cost is kept to a minimum.
1. Building Survey before entering into the lease.
Tenants are discouraged from the expense of having a survey carried out before entering into a new lease. It’s an added expense in addition to all of the moving costs. However, a survey at this stage is invaluable for assessing the condition of the property at the start of the lease and tells a prospective tenant what work it is likely to have to undertake (or provide for in the accounts) at the end. It will identify whether there are any major items which are already in need of attention, and what shelf life there is for these. If, (for example,) the roof is already in need of repair, a discussion with the landlord may result in a reduced liability for the tenant at the end of the lease.
2. Discussions with the landlord before completion.
If the survey does reveal problem areas with major items, such as the roof, windows, or lift, it may be possible at this early stage to negotiate a reduced repairing liability with the landlord. Options include a schedule of condition, taking the interior of the premises only, or a reduced liability in respect of particular items.
3. Regular maintenance programme throughout the lease term.
Tenants can reap the rewards of a regular maintenance programme throughout the term. Doing the little jobs about the place that a reasonable tenant would do keeps on top of smaller things that may escalate out of control and become a sizeable repair bill in the long term (for example roof maintenance, maintaining roller shutter doors and any services belonging to the landlord). It’s easier on cash flow, keeps the property in repair, secure and efficient, and a tenant is far less likely to have a problem which then disrupts operations. If a programme is followed throughout the term, the dilapidations costs at the end of the term are likely to be more manageable. Whilst not every tenant has the business need to employ a facilities manager, an annual review and capital maintenance programme will still assist.
4. Taking care with alterations and adjustments.
When making alterations and adjustments to the premises take care with what they are being attached to, or how much is being fixed to the premises which may have to be repaired. For example, attaching signage to anything metal may result in the requirement to replace that at the end of the term; affixing partitioning to skirting boards and window fittings will result in a wholesale replacement of said skirting and damage to the window fittings. Can these things be affixed in an alternative, less instructive way?
5. Do the decorating and cleaning.
This may sound a simple one but a tenant will always have internal and external decorating obligations, to be undertaken in certain years of the term. Prior to vacating, it’s important to make sure that these decorating obligations are adhered to as a landlord can charge a tenant as part of dilapidations for doing this work themselves. If the lease says decorate with three coats of paint it means do exactly that! Again, liability can be minimised by keeping on top of some of these items during the term – bearing in mind there may be an obligation to do it all again in the final year prior to vacating.
Keeping the premises clean and tidy is often overlooked. Taking basic steps such as keeping car parks swept and free of debris will mean less work to do later on. Keep on top of any foliage that there may be at the premises during the term and make sure any unwelcome graffiti is cleaned away. The same applies to cleaning internally. It’s easy to overlook slightly discoloured tiles, ceiling tiles and lights, only to find they get so bad they need to be replaced at the end of the term.