5 ways a commercial tenant can reduce their dilapidations liability

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Occupying property is a business need for most tenants, and a profession for investors who employ specialist advisors to manage the process, so conflict between the parties is almost inevitable.

At the end of a tenancy most leases require the property to be placed in an appropriate condition, i.e. “Dilapidations”, this process is all about good habits and behaviours. Below we set out our recommendations for tenants to remember as they prepare to navigate their way through the process, and not fall victim to a landlord’s claim be it for a financial loss, or a request for works to be performed.

Before you sign a lease, or move into a property

Estate Agent Giving House Keys To Man

1- Have a professional survey the premises to identify the risks

A pre-occupation survey can take various formats but the purpose is always the same, identify what it is that is being let and what are the risks that you need to be aware of, such as damage to carpets, etc.

Once you know the risks informed decisions can be made that best represent your interests. The outcome maybe that the landlord performs works before the lease starts, a schedule of condition (SoC) is appended to the lease to limit obligations, or you look for an alternative property.

2- Either way have a schedule of condition

A SoC is a record of the condition of a property at the commencement of the lease, and is an extremely useful tool when it comes to dilapidations as most tenants have no liability to put a property into better repair or condition than it was at the start of the lease (dependent upon the lease terms). A SoC can be produced to suit the situation, with pictures, text, video or a combination of them all.

Without evidence to support your position it is difficult to limit a dilapidation claim. Never miss an opportunity to help yourself later down the line, always consider getting a SoC when you sign an occupational lease. A few pounds spent now could save you thousands later down the line.

Once you are in occupation, plan ahead

plan ahead

3- Get a dilapidations liability assessment

A liability assessment will provide a likely tenancy end dilapidations cost, all as the lease dictates, and will enable you to put in place a plan to minimise your exposure. Not having one is like not wearing a seat belt when you drive. Having a plan will keep you on the front foot and lead to success.

Professionally prepared liability assessments can also save you money on your tax bill under Financial Reporting Standard (FRS) 12, where a reliable estimate of your lease end dilapidation cost can be deemed an expense, allowing sums to be excluded for the company’s tax computation.

Thinking of moving out, or your lease ending?

moving out

4- Get help with a plan and notice compliance

Leases can be tricky things and if you do not adhere to their stipulations then your best efforts could be easily wasted. This particularly applies to breaks or reinstatement of alterations, where leases need certain periods or notice types to be complied with, get them wrong and you leave yourself at the mercy of the landlord, and English courts are very clear inaccuracy will not be tolerated.

Success can only be achieved if conditions are met so always get good legal and surveyor advice, the sooner the better.

5- Perform the works and retain control

As a tenant, you are great at doing what it is you do and successfully leaving a building is not something you do regularly, so this option can be forgotten, or considered too late. Performing the works will either eliminate a dilapidation claim, or at least lower its impact.

When you plan your move, allow time for the works and get a professional on-board who can prepare a timeline and an appropriate specification. The more options you have the better, and even if you do not perform the works the evidence from tendering them will give your advisor great ammunition to use in reducing the settlement. Plan to succeed and you will.

Ready for Anything

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The moto “Ready for Anything” (Utrinque Paratus) has no better relevance than when dealing with tenant dilapidations management.

Prepare to succeed by planning and taking good advice as soon and possible.

Vantage are experienced dilapidation consultants working for both landlords and tenants in the UK and Europe occasionally so we know the position from both sides of the fence, enabling our advice to be realistic and commercial.

If you a have dilapidation scenario active or one approaching then do not hesitate to call us for some advice, we welcome helping our clients set things off on the right path from day one.