Dilapidations advice please

[DanH]

Hi,

One of the companies I work for is moving to another part of the country and the lease on the warehouse is coming to an end. I'm trying to help the existing owner as he's a little bit panicked about dilapidation work on a slightly bigger unit (12,000 sq ft) across the road owned by the same landlord costing upwards of £400k! The difference between that and the owner's property is the contract states 'as new' whereas his is a repairing and insuring lease, which was drawn up by a solicitor (relevant repair/decoration section pasted below).

He's always been aware that he would be replacing the carpets and painting the internal walls, but he's not sure what else they might pick up on 'reasonably'. The agent has already mentioned 'substantial' costs and the involvement of a surveyor for a schedule of dilapidations, but at that point the agent hadn't realised that it was a brand new lease/contract and not the original contract as he thought. The property was in good order when the owner moved in but not new, it was a few years old at that point, with original part worn carpets etc.

Based on what we've both read so far, it seems the landlord can ask for whatever he wants with the expectation that it is negotiated down. One problem is that, although the tenant has a video and some pictures of when he moved in, he's not sure if that would count as evidence as to it's condition? Whats more, the landlord and agent don't have any photographic evidence at all!

So, after panic and speculation I agreed to ask the forum these questions!

1. What typically happens in this kind of situation where the landlord does not have evidence of the state of the building when the lease began? Does it get all legal-y then?

2. If a surveyor is sent in, what is the surveyor's datum point? Or does he/she go from 'new'?

3. Is there a timescale of when the surveyor must be deployed and give their results? Could they come on the last day and give a list of dilapidations that the tenant can't repair themselves as they cannot access the building?

4. Should the business owner get a pre-emptive survey done (how much are they?) or wait until a survey is forthcoming from the landlord and THEN get a counter survey?

5. What would you do in this situation?

The owner is thinking about paying for a surveyor's advice prior to getting any kind of survey done, just for peace of mind (if they can give it).

I have pasted the bit in the contract that discusses repair. As far as the tenant is concerned, there doesn't seem to be any wordology in it that suggests back to 'new'...

Repair
(a) To keep the Premises in good and substantial repair and condition and when necessary to replace and renew any Landlord's fixtures and fittings with new ones of equivalent quality and value to the reasonable satisfaction of the Landlord (damage by Insured Risks excepted save to the extent that any insurance money is irrecoverable as a result of any act or default of the Tenant or any occupier of the Premises).

(b) Regularly to maintain, service and clean all gas, electrical, hydraulic and other mechanical installations and equipment forming part of or in the Premises in accordance with any relevant manufacturer's or installer's maintenance manual and when necessary to have such installation and equipment repaired or replaced by qualified persons who are and at intervals which are approved by the manufacturers and/or insurers of such installation and equipment.

(c) To clean the Premises (including all drains and gutters) regularly (and at least once a month in the case of windows) and keep them in a clean and tidy condition at all times.

(d) To replace the carpets and other floor coverings at the Premises when necessary with others of equivalent quality to those at the Premises at the date of this Lease and to replace them in the last 6 months immediately prior to the end of the Term in colours approved by the Landlord.

(e) To keep any parts of the Premises not built upon adequately surfaced, in good condition and free from weeds and any garden or landscaped areas properly cultivated.

Decoration
When necessary and in any event in the last 6 months immediately prior to the end of the Term to prepare and paint, decorate or otherwise treat as appropriate all parts of the Premises which are usually painted, decorated or treated (at all times in respect of the external parts of the Premises and in the last 6 months immediately prior to the end of the Term in respect of the internal parts of the Premises in such colours and with such materials as the Landlord may require).

Alterations
(a) Not to erect any new building on the Premises nor to make any alterations or additions to the structure or exterior of the Premises or which affect the external appearance of the Premises nor (save as may be permitted under clause 3.6(b)) to make any other alterations or additions to the Premises.

(b) Not without the Landlord's prior written consent (which shall not be unreasonably withheld or delayed):
(i) to make any internal non-structural alterations or additions to the Premises (except that no such consent will be required for the Tenant to install, alter or remove non-structural demountable partitioning or racking]; nor
(ii) to make any alterations or additions to the mechanical and electrical systems in the Premises; nor
(iii) to make any alterations which may have an adverse impact on Environmental Performance.

(c) To supply to the Landlord such drawings and specifications as the Landlord reasonably requires to identify any proposed alterations or additions whether or not requiring the consent of the Landlord and to carry out such alterations or additions only in accordance with such drawings and specifications in a good and workmanlike manner and to the reasonable satisfaction of the Landlord.

(d) To obtain all necessary consents and approvals for any proposed alterations or additions whether or not requiring the consent of the Landlord and to supply copies to the Landlord.

(e) To execute a formal licence in respect of any proposed alterations or additions requiring the consent of the Landlord in such form as the Landlord reasonably requires.

(f) If so required by the Landlord, to provide security to the Landlord sufficient to enable the Landlord to complete any proposed alterations or additions whether or not requiring the consent of the Landlord if the Tenant having commenced the alterations or additions fails to complete them expeditiously.

(g) If and to the extent so required by the Landlord, to reinstate the Premises at the end of the Term and to make good all consequential damage to the reasonable satisfaction of the Landlord.

 

[kulture]

I would recommend getting professional advise and your own surveyor. I really don't like any lease which has the requirement to replace the landlords fixtures and fittings. It is above and beyond what I consider reasonable. But it is in the lease which presumably does not have a schedule attached to it confirming the original condition. This may well be another example where failure to listen to a solicitor or indeed failing to use a solicitor has landed someone in a potential minefield.

Of course details matter, and there may well be other clauses and paragraphs in the lease that mitigate the likely outcome. Hopefully your friend did use a good solicitor originally and is covered elsewhere in the lease.

 

[DanH]

I would recommend getting professional advise and your own surveyor. I really don't like any lease which has the requirement to replace the landlords fixtures and fittings. It is above and beyond what I consider reasonable. But it is in the lease which presumably does not have a schedule attached to it confirming the original condition. This may well be another example where failure to listen to a solicitor or indeed failing to use a solicitor has landed someone in a potential minefield.

Of course details matter, and there may well be other clauses and paragraphs in the lease that mitigate the likely outcome. Hopefully your friend did use a good solicitor originally and is covered elsewhere in the lease.

Thanks Kulture, well a solicitor was used (and still in business!), dunno how good they were though...no schedule attached either so could get 'interesting'....

 

[WaveJumper]

Unfortunately as above having the correct advice from an experienced commercial solicitor when taking on a lease is worth every penny in my book. In short delaps can be a minefield, a full survey should have been carried out before signing the lease but you are where you are and its going to come down to the detail in lthe ease and a lot of negotiation between parties.

If you had photographic evidence etc this should have been "attached" to the lease so both parties were fully aware of condition. The landlord is probably going to appoint a surveyor to write a delaps report, and I would suggest you need to get your own engage as already suggested above.

You can have read here no the RICS code of practice concerning this subject.

https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/building-surveying-standards/dilapidations-in-england-and-wales

https://www.rics.org/dispute-resolution-service/drs-services/dilapidation-disputes

I only hope lesson learnt and a better "approach" has been made on acquiring the new warehouse.

 

[MBE2017]

Since the lease has been made totally in favour of the landlord, I would approach the landlord explaining you plan to make good etc before leaving, and suggest he visits the property with you to negotiate how much, what items etc will be included.

If you let him get any professional involved it could become very expensive, you will need to find out his position eventually so it might as well be before the work commences. If you are really lucky, he might go easy on yourselves.

 

[DanH]

Unfortunately as above having the correct advice from an experienced commercial solicitor when taking on a lease is worth every penny in my book. In short delaps can be a minefield, a full survey should have been carried out before signing the lease but you are where you are and its going to come down to the detail in lthe ease and a lot of negotiation between parties.

If you had photographic evidence etc this should have been "attached" to the lease so both parties were fully aware of condition. The landlord is probably going to appoint a surveyor to write a delaps report, and I would suggest you need to get your own engage as already suggested above.

You can have read here no the RICS code of practice concerning this subject.

https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/building-surveying-standards/dilapidations-in-england-and-wales

https://www.rics.org/dispute-resolution-service/drs-services/dilapidation-disputes

I only hope lesson learnt and a better "approach" has been made on acquiring the new warehouse.

Thanks, the tenant went with a solicitor but it would seem that advice was not given to take pictures and the landlord failed to do so too. I'm guessing (will speak to him tomorrow) that the solicitor may not have been experienced in commercial...

 

[DanH]

Since the lease has been made totally in favour of the landlord, I would approach the landlord explaining you plan to make good etc before leaving, and suggest he visits the property with you to negotiate how much, what items etc will be included.

If you let him get any professional involved it could become very expensive, you will need to find out his position eventually so it might as well be before the work commences. If you are really lucky, he might go easy on yourselves.

Thanks, it would appear that the landlord only deals via the agent who is not great with quick communication, possibly deliberately. This is why I asked the questions regarding whether the tenant should pre-emptively get a survey done as he fears leaving then getting a retrospective dilaps bill of which he cannot get the work done or realistically appeal.

 

[DanH]

OK, it turns out the solicitor was a commercial solicitor which I find a bit odd considering the tenant was never advised to attach a schedule confirming the original condition. It's equally baffling the agent never got one either. So it will literally be the agent's interpretation versus the tenants video and pictures, albeit scant in detail. I think he's going to get a surveyor in for 'advice' although that is costing a bit!

 

[WaveJumper]

I would be tempted to get the dialogue going with he landlord first before incurring your own costs, you never know he might just be expecting a lick of paint over the walls and floors and your good to go. If the landlord is only communicating through an agent then hound the agent until you get an answer. You could of course write to the landlord and ask for a meeting I very much doubt he will refuse.

 

[kulture]

I would discuss this with that solicitor and ask why such an obvious protection was omitted. It may be that there is something hidden in the details of the lease that covers your friend. Otherwise there is always the solicitor’s professional indemnity insurance as on the face of it there has been some negligence.

 

[Newchodge]

Sorry, I have become very confused between the words owner, tenant, etc.

Forget the unit over the road. The property you are involved with, does that have an 'as new' requirement. What, specifically, does the lease say about end of tenancy? I agree that you need professional advice.

 

[DanH]

Thanks guys, will advise accordingly.

 

[WaveJumper]

I would discuss this with that solicitor and ask why such an obvious protection was omitted. It may be that there is something hidden in the details of the lease that covers your friend. Otherwise there is always the solicitor’s professional indemnity insurance as on the face of it there has been some negligence.

As always in these cases the lease is king and a chat with the solicitor involved is a you recommend called for to get clarification before this goes off the rails

 

[DanH]

Sorry, I have become very confused between the words owner, tenant, etc.

Forget the unit over the road. The property you are involved with, does that have an 'as new' requirement. What, specifically, does the lease say about end of tenancy? I agree that you need professional advice.

Sorry, I realised this myself when writing replies : )

There's the business owner who is the tenant and the landlord who is the owner of the property. I'll try to keep the words tenant and landlord to avoid confusion, personally just a bit odd for me referrring to him as tenant!

 

[DanH]

Sorry, I realised this myself when writing replies : )

There's the business owner who is the tenant and the landlord who is the owner of the property. I'll try to keep the words tenant and landlord to avoid confusion, personally just a bit odd for me referrring to him as tenant!

..and 'yes' the property over the road seems to be a different kettle of fish as that unit was leased from new. Still not sure how they got to such obscene dilap figures, you could probably build a new unit for those sums! Unfortunately the tenant of that building has long left so can't be contacted for any kind of information sharing/advice.

 

[WaveJumper]

Something to read on FRI whilst having your coffee this morning ?

What is a Full Repairing and Insuring Lease?

A full repairing and insuring lease (“FRI Lease”) is a lease in which the tenant takes on all of the costs for repairs

www.herrington-carmichael.com

 

[DanH]

Something to read on FRI whilst having your coffee this morning ?

What is a Full Repairing and Insuring Lease?

A full repairing and insuring lease (“FRI Lease”) is a lease in which the tenant takes on all of the costs for repairs

www.herrington-carmichael.com

Thanks, it states the usual 'make sure you get it sorted at the outset' which is not the position the tenant is in. I think the only thing in his favour is the fact the landlord and agent don't have (or have less of) a reference point. Either way, they can still go for the jugular and according to that article, you're obliged to fix it.

 

[WaveJumper]

And if the landlord is a bit savvy unfortunately he may well do so.