Dilapidations on business lease

[crelding]

This is a case of us being too trusting in the estate agent, not taking responsibility for looking at things in detail, and being too hasty in taking a lease. It is a lesson learnt, I know we were a bit dumb. Just looking for advice on a bit of damage control on this.

In essence, we have moved to a new property, and had a dilapidation report on the old place. The old landlord want us to completely re-decorate the old unit. Floor, walls - everything.

The unit was in pretty good condition when we moved in, but it did have signs of wear and tear. The floors were scuffed/ marked, things had been bolted into the floor, wires hanging on the walls etc. Clearly wasn't fully redecorated before we moved in.

We understood that we were only required to return things in the way we received them. This was verbally said by the estate agent (not in the contract though). At the time it made sense though - we got the unit in a 'used' state, and thought we could return it as such. We understood 'dilapidation' to mean damage/ state of disrepair etc made by us, and didn't apply to things that were already there.

The contract DOES say that we will be responsible to redecorate.

So my first question is - are we required to return it back in a condition better than it was given to us in/ repair damage we didn't do? Is there anything we can kick back with so we don't have to paint everything?

We do have pictures of the unit before we took it, so can show the damage that was there prior to us moving in, and show it wasn't handed to us in a newly decorated state (so previous tenant clearly didn't do what they asked).

Also, say we paint it all etc, what is stopping the landlord being extra picky? "Paint bristle in the paint work? Need a whole new wall", type thing?

Let me know your thoughts, and feel free to tell me too look at contracts in more detail

 

[Michael Loveridge]

Unfortunately, it's not possible to give worthwhile advice, as so much depends on the wording of your lease and the actual condition of the property.

How you deal with it also depends on the amount being sought by the landlord. If it's just a couple of thousand quid then you may be able to do a deal yourself, but if it's a significant amount you would be better off hiring a specialist commercial surveyor to negotiate on your behalf.

There is a `Dilapidations Protocol' which parties are expected to follow, and you can read about it here - http://www.dilapidations.net/dilapidations-protocol/

 

[ComPropSolicitor]

First question is did you use a solicitor? If not, then that's the error here. We are here for a reason and taking the correct advise at that time would have meant that we would have been able to modify the repairing provisions in the Lease for you. namely, so that you didn't have to hand the property back to the landlord in any better state of repair and or condition.

 

[deniser]

Assuming that you had a pretty standard sort of lease and didn't negotiate it and get things changed, your lease probably includes an obligation on your part of something along the lines of "to put and keep the property in good repair and decorative condition".

This means that, regardless of the condition you took the property in, you must hand it back in good condition. It is a very common misconception that you only have to hand it back in the same state that you received it. You would not, however, usually (depending on your lease wording) be expected to "improve" the property eg. paying for a new roof when repairs would have sufficed. So you need to go through your schedule of dilapidations looking at each individual item in conjunction with your lease wording.

Also, have a look at s.18 of the Landlord and Tenant Act 1927. This gives you two limitations on what you might have to pay:

1. Landlords can only claim dilapidations equivalent to the diminution in their reversion. This means that they can only charge a maximum equivalent to the difference between the value of the property with the repairs and the value without the repairs. For this you need to look at the use of the property. A building used for storage doesn't need to be as pristine as an office or shop as there is no difference in value to an old warehouse which is recently painted or not.
2. Landlords can't charge for dilapidations which would be rendered worthless by alterations or building works which are planned for after you leave.

S.18 is very complicated so you will need to read up on it. Don't just accept the schedule of dilapidations at face value.

Hope this helps.

 

[WaveJumper]

Did you undertake a photographic survey for the records before you moved in

 

[deniser]

Did you undertake a photographic survey for the records before you moved in

A photographic survey isn't any use unless referred to in the lease and coupled with a watering down of the standard repairing obligations. This is because the state of the property when the lease was granted is irrelevant unless specifically negotiated.

 

[MOIC]

Unfortunately, it's not possible to give worthwhile advice, as so much depends on the wording of your lease and the actual condition of the property.

How you deal with it also depends on the amount being sought by the landlord. If it's just a couple of thousand quid then you may be able to do a deal yourself, but if it's a significant amount you would be better off hiring a specialist commercial surveyor to negotiate on your behalf.

There is a `Dilapidations Protocol' which parties are expected to follow, and you can read about it here - http://www.dilapidations.net/dilapidations-protocol/

As above.

 

[Chris Ashdown]

Nothing to stop you asking the landlord if they will take a payment instead, then you can make the choice between getting it done or paying the landlord, i would guess paying the landlord may be cheaper as they will most likely do nothing with the money apart from banking it

 

[Supercoach]

‭

A photographic survey isn't any use unless referred to in the lease and coupled with a watering down of the standard repairing obligations. This is because the state of the property when the lease was granted is irrelevant unless specifically negotiated.

+1

 

[MOIC]

This is a case of us being too trusting in the estate agent, not taking responsibility for looking at things in detail, and being too hasty in taking a lease

I think it's more a case of not instruction a solicitor to check, explain and advise on the lease.

Readers viewing this thread who are thinking of taking on a lease should learn from this mistake and ALWAYS have a competent solicitor look, explain fully your obligations and advise on a lease before signing.

 

[crelding]

Unfortunately, it's not possible to give worthwhile advice, as so much depends on the wording of your lease and the actual condition of the property.

How you deal with it also depends on the amount being sought by the landlord. If it's just a couple of thousand quid then you may be able to do a deal yourself, but if it's a significant amount you would be better off hiring a specialist commercial surveyor to negotiate on your behalf.

There is a `Dilapidations Protocol' which parties are expected to follow, and you can read about it here - http://www.dilapidations.net/dilapidations-protocol/

Very useful, thanks

Assuming that you had a pretty standard sort of lease and didn't negotiate it and get things changed, your lease probably includes an obligation on your part of something along the lines of "to put and keep the property in good repair and decorative condition".
This means that, regardless of the condition you took the property in, you must hand it back in good condition. It is a very common misconception that you only have to hand it back in the same state that you received it. You would not, however, usually (depending on your lease wording) be expected to "improve" the property eg. paying for a new roof when repairs would have sufficed. So you need to go through your schedule of dilapidations looking at each individual item in conjunction with your lease wording.

Also, have a look at s.18 of the Landlord and Tenant Act 1927. This gives you two limitations on what you might have to pay:

1. Landlords can only claim dilapidations equivalent to the diminution in their reversion. This means that they can only charge a maximum equivalent to the difference between the value of the property with the repairs and the value without the repairs. For this you need to look at the use of the property. A building used for storage doesn't need to be as pristine as an office or shop as there is no difference in value to an old warehouse which is recently painted or not.
2. Landlords can't charge for dilapidations which would be rendered worthless by alterations or building works which are planned for after you leave.

S.18 is very complicated so you will need to read up on it. Don't just accept the schedule of dilapidations at face value.

Hope this helps.

Also very helpful!

Thanks for the replies.

Final question - more specific this time. They have also asked for an electrical certificate and testing upon leaving the property. There was already electrics in. Is certificate/ testing required as it doesn't mention this in the contract at all.

Not a massive deal - but seeing as they are being a bit awkward, I don't feel like doing more than I am required

 

[WaveJumper]

I think it's more a case of not instruction a solicitor to check, explain and advise on the lease.

Readers viewing this thread who are thinking of taking on a lease should learn from this mistake and ALWAYS have a competent solicitor look, explain fully your obligations and advise on a lease before signing.

This advice is worth its weight in gold.

I always knew when someone had taken proper legal advice as the lease was returned with whole sections scrubbed out with a big black marker pen.

 

[kulture]

Final question - more specific this time. They have also asked for an electrical certificate and testing upon leaving the property. There was already electrics in. Is certificate/ testing required as it doesn't mention this in the contract at all.

Not a massive deal - but seeing as they are being a bit awkward, I don't feel like doing more than I am required

You are asking the wrong question. Perhaps if I re-word it you will be able to better realise the answer.

"Should I get an expert to provide me with the electrical safety certificate (that I should in any case have) in order to stop the landlord (whom I don't trust) claiming for extra electrical work that may not be needed?"

There, that's a better wording of your question. Do you need an answer?

 

[crelding]

@kulture Yeah - that does make sense. But, you say that I should already have. When/ why should I have one? The electrics were already there, so should I have been provided one, is probably the actual question?

 

[deniser]

@kulture Yeah - that does make sense. But, you say that I should already have. When/ why should I have one? The electrics were already there, so should I have been provided one, is probably the actual question?

Not if you didn't ask for one before you took on the lease.
Hindsight is a wonderful thing but when taking on a business lease, you should first get surveys done, not just of the unit you are taking but of the whole building, and that includes the electricals. This is because, one way or another, you are going to end up paying for things that do need doing. For things that need doing in your unit, you will either have to repair them or pay for them as dilapidations. For things that need doing to the building (if you only have part) you will have to pay for them through the service charge.
If you get a survey and it throws up a problem you can factor this into your lease negotiations in several ways:
1. ask the landlord to carry out the works before you move in
2. or get a rent reduction
3. or get a rent free period
4. and/or get the survey attached to the lease as a schedule of condition coupled with a proviso that you won't be required to put the property into a better state of repair than evidenced by the survey.
If the property looks in good condition you can just get a surveyor walk through for your peace of mind. If there are issues you can commission a fuller survey. But getting an electrical report is probably the very minimum that you will want to do.

 

[MOIC]

They have also asked for an electrical certificate and testing upon leaving the property. There was already electrics in. Is certificate/ testing required as it doesn't mention this in the contract at all.

As strange as it may seem, as the departing occupier, you must ensure there is an electrical certificate, irrespective if there was one when you first occupied the premises.

Another point that a solicitor would have advised you on.

Depending on the amount the landlord is claiming for the dilapidations, I would just pay up, if its within 20% of your estimated costs.

If you contest anything, then you will need to do it via a surveyor and they are not cheap. The landlord can (and will) also claim costs on his side.

 

[Supercoach]

As strange as it may seem, as the departing occupier, you must ensure there is an electrical certificate, irrespective if there was one when you first occupied the premises.

This is correct.

 

[ecommerce84]

I would also echo the advice of having an electrical certificate when you leave.

Having one that says the electrics are safe on the date that you left will mean that should anything happen in the future (next tenant electrocuted themselves somehow for example) then no one can come back and point the finger at you or your company.

As for the dilapidation report - the lease we recently signed originally said that we would replace the flooring on exit among other things, but he had this removed from the final lease.

I’d give your lease a read or preferably have a sit down and go through it with a commercial solicitor. A few hours of their time could save you a lot of money.

 

[ecommerce84]

Actually to follow on from what @MY OFFICE IN CHINA in China says above to anyone reading this and thinking of skipping legal advice.

Our solicitor charged £500+VAT for his part in our lease negotiation. Picking up on and removing that one clause above (replacing the flooring) has saved us more than his fee alone.

 

[Rblack]

If a commercial landlord has applied for planning permission to do works on a commercial property which would mean the tenants operating a business in the property would have to leave if the planning permission was successful and works began. Being it's the final year of the tenants lease would the tenants have to carry out dilapidation's, if the planning permission is REJECTED?. The fact that the landlord had it in mind and applied to develop. Can the tenants minimize dilapidation's or refuse?

Thanks