Schedule of dilapidations - Landlord going for our deposit! Advice needed

[JuFoster]

Hi all,

So I have a 5 year commercial lease in Central London ending. We have a £40k deposit associated with the lease.
We would've liked to stay on in the building, but the landlord said no to an extension of the lease. - She is a scumbag. Having completed the lease, and paid her through covid, we expected to be treated better.

The lease was taken on without a schedule of condition being done, and with clauses in the lease stating redecoration at the end of the term. - Yes I know, we should have taken advice, should have gotten the schedule of condition done......we were naive. Can't change the past!

Over the course of the 5 years, we have improved the property, looked after it, made it better.

The LL via a chartered surveyor has provided us with a report on dilapidations and proposed works:
It's just under £40k total
includes £6k or so of professional fees
+ many other suggested works which would refurbish the property to a standard far higher than the way it was when we took the building on.

The property is a 1200 Sq Ft set of 4 offices. Rent was around £50k pa

It seems completely unethical to use our deposit to improve the property for our landlord.

How can we get our deposit back, and fight again what this surveyor is saying?

All advice kindly and thankfully accepted!

 

[kulture]

Talk to a solicitor. With £40k on the line, and with exact details being important, it would be difficult for anyone on a public forum to properly advise you.

 

[kulture]

Points that you must go over with the solicitor is whether the lease is within or not the Landlord and Tenant Act. Whether the landlord has gone through the correct process to get you to leave .

 

[MBE2017]

I hope you can get affordable help. You realise your mistake, without the schedule of condition being taken, your landlord is in as poor a situation as yourself, except they have your deposit.

 

[WaveJumper]

What reason was given for not granting a new lease

 

[Gyumri]

a chartered surveyor has provided us with a report on dilapidations and proposed works:

How can anyone report on dilapidations if there is no evidence of what the place looked like when you moved in?

As has been said above by @kulture this is really a situation where you need to look at the lease and I would say any emails etc exchanged at the time or photographs that might provide evidence that the LL is trying it on.

A schedule of dilapidations can only be prepared if there is evidence of the condition at the outset.

 

[MOIC]

I imagine the wording in the lease covers the landlord for dilapidations to bring the property to a reasonable standard. If you didn't make a report on the property condition, then that's against you, if a dilapidations clause was in your lease.

With regard to the report prepared by the landlord, get your own dilapidations surveyor to prepare a report on your behalf. There will almost certainly be savings, which will more than cover their charges. They will also negotiate too agree a figure.

 

[Duke Fame]

How can anyone report on dilapidations if there is no evidence of what the place looked like when you moved in?

As has been said above by @kulture this is really a situation where you need to look at the lease and I would say any emails etc exchanged at the time or photographs that might provide evidence that the LL is trying it on.

A schedule of dilapidations can only be prepared if there is evidence of the condition at the outset.

Sadly that is not true.

For starters, you are paying for the surveyor's report so roughly a grand goes for a small retail shop. Then, the surveyor starts to go to town

 

[Duke Fame]

Hi all,

So I have a 5 year commercial lease in Central London ending. We have a £40k deposit associated with the lease.
We would've liked to stay on in the building, but the landlord said no to an extension of the lease. - She is a scumbag. Having completed the lease, and paid her through covid, we expected to be treated better.

The lease was taken on without a schedule of condition being done, and with clauses in the lease stating redecoration at the end of the term. - Yes I know, we should have taken advice, should have gotten the schedule of condition done......we were naive. Can't change the past!

Over the course of the 5 years, we have improved the property, looked after it, made it better.

The LL via a chartered surveyor has provided us with a report on dilapidations and proposed works:
It's just under £40k total
includes £6k or so of professional fees
+ many other suggested works which would refurbish the property to a standard far higher than the way it was when we took the building on.

The property is a 1200 Sq Ft set of 4 offices. Rent was around £50k pa

It seems completely unethical to use our deposit to improve the property for our landlord.

How can we get our deposit back, and fight again what this surveyor is saying?

All advice kindly and thankfully accepted!

I had this with out previous retail unit in Manchester.

We were warned by the previous occupant some 13 years before.

Have you got a PG on the property?

Have you moved out already?

We withheld the final month of rent just to give a bit of bargaining power but we had a PG on it so were in a weak position.

There is a RICS 'good protocol' on dilapidations, challenge every aspect. It is good practice is to allow you to make good any issues raised. Make sure you offer to do so.

Is it an agent you are dealing with or the landlord. If it's an agent, keep by-passing them and hassle the landlord.

If there is an agent, threaten bad publicity.

If you can get to the landlord behind the agent's back, take a letter and get them to sign something accepting a figure you are prepared to forego say £5,000 in full and final settlement.

Our dilaps bill was £12k via a Manchester agent, we got it down to £4k including one month's rent.

Challenge everything, remind them of the RICS protocol you can download it from here: https://www.justice.gov.uk/courts/p...ation-of-a-tenancy-the-dilapidations-protocol

Use terminology from the protocol and previous cases. I recall that the aim of the protocol is to put the landlord back in the position prior to the lease being signed, not to improve the property.

Give every indication that you want to go to court on this, write letters 'without prejudice' and 'open letter'

Show you are willing to address some of the items on the report and be willing to put it right on a certain date.

Pick out something you have improved (such as flooring) that would be valuable to a future tenant and advise you will remove it.

Remember, the report is their opening gambit, they don't expect you to accept it. You are in a weak position having given a deposit. I can't remember if the tenent's deposit scheme covers commercial property but if so, bring them into the argument ASAP

 

[Gyumri]

write letters 'without prejudice' and 'open letter'

I would keep the correspondence open and only write WP if there is a reason to do so - WP correspondence can't be shown to or read by a judge

 

[Duke Fame]

I would keep the correspondence open and only write WP if there is a reason to do so - WP correspondence can't be shown to or read by a judge

Yes, indeed.

My reasoning is that you give every indication you will be going to court by indicating what you intend to show to a court. I was advised to ensure you look entirely reasonable to a court and that you are following the protocal.

 

[BubbaWY]

A schedule of dilapidations can only be prepared if there is evidence of the condition at the outset.

I may be wrong but isnt the onus on the tenant to produce a condition report upon taking on the lease? More to protect themselves in situations like this.

Its slightly different, but when we do a project at work on an existing facility. We have to carry out a condition report to protect ourselves. For example, there may be a stone flag which isnt actually part of any works, but its within the area of works. So a photo of that and any current damage protects us from any claim that the damage was caused during the works.

Also, oddly, any improvements made to the property are usually irrelevant. Ive had it where a tenant has put in a mezannine floor for additional storage in a warehouse but have had to take it out and return it back to how it was when they occupied. Or a tenant has sub-divided open plan office space into individual offices, but had to rip it all out prior to departing.

 

[WaveJumper]

I may be wrong but isnt the onus on the tenant to produce a condition report upon taking on the lease? More to protect themselves in situations like this.

Its slightly different, but when we do a project at work on an existing facility. We have to carry out a condition report to protect ourselves. For example, there may be a stone flag which isnt actually part of any works, but its within the area of works. So a photo of that and any current damage protects us from any claim that the damage was caused during the works.

Also, oddly, any improvements made to the property are usually irrelevant. Ive had it where a tenant has put in a mezannine floor for additional storage in a warehouse but have had to take it out and return it back to how it was when they occupied. Or a tenant has sub-divided open plan office space into individual offices, but had to rip it all out prior to departing.

All very 'hitting the nail on the head', if you have not carried out a condition report before signing the lease (as you have now found out) is asking for trouble. And it does not matter how much the tenant has spent on a unit if the landlord wants it stripped back to a shell thats exactly what they are going to do when you move out, and as @BubbaWY mentions I have also had contractors remove many a mezzanine floor in the past, the devil as always is in the detail.

 

[JuFoster]

What reason was given for not granting a new lease

None other than they did not wish to extend the existing lease, or offer a new lease to us.

The lease is outside of the L&T ACT 1954 (We signed a stat dec on LL's request for this) and therefore no issues with the way the LL determined the agreement.

Very possible though that between LL & managing agent they have planned to determine the lease to make use of the delapidations Vs our deposit and to improve the value of the space and rent it for more.

As a company we have been up front with financial issues we've had since covid - so LL probably knows that we couldn't pay for the headline rental that she wants to achieve.

 

[Gyumri]

Is there any covenant in the lease to keep the premises in good repair? If not then dilapidations wouldn't surely apply.

Secondly, s18 of the 1927 Act imposes a limit or "cap" on the amount of damages that the LL can obtain for breach of a covenant to repair limited to the diminution in the reversionary value - so if the LL can let out or lease the premises for the same or higher price then there is no loss. It's worth checking all these points.

 

[Duke Fame]

All very 'hitting the nail on the head', if you have not carried out a condition report before signing the lease (as you have now found out) is asking for trouble. And it does not matter how much the tenant has spent on a unit if the landlord wants it stripped back to a shell thats exactly what they are going to do when you move out, and as @BubbaWY mentions I have also had contractors remove many a mezzanine floor in the past, the devil as always is in the detail.

That is true, but what the tenant should have done 5 years ago isn't going to sort out the issue now.

The first thing to establish is the dilapidations reasonable and in line with the protocol. Is it completed by a competent person.

When I was in the position of the OP, I made myself a menace without being menacing . Hassle everyone, especially the landlord and directors out of hours and at weekends without being harassment.

Pretty much make it a position where it really isn't worth the landlord or agent pursuing. Admittedly, it's difficult when they have £40k in their bank but the OP needs to look like they will go legal.

 

[Duke Fame]

None other than they did not wish to extend the existing lease, or offer a new lease to us.

The lease is outside of the L&T ACT 1954 (We signed a stat dec on LL's request for this) and therefore no issues with the way the LL determined the agreement.

Very possible though that between LL & managing agent they have planned to determine the lease to make use of the delapidations Vs our deposit and to improve the value of the space and rent it for more.

As a company we have been up front with financial issues we've had since covid - so LL probably knows that we couldn't pay for the headline rental that she wants to achieve.

There is a managing agent involved? It could well be that the agent is the greedy ones here.

I do work for a landlord who's agent gets a kickback from the surveyor, don't be afraid to challenge the survyor, ask for RICS membership details, threaten to report. (it's not advisable but I contacted the surveyor on a late Friday afternoon to find the individual who did the report's memerbership had lapsed so scare the bejesus out of them)

First thing is to Challenge the report, go through each point, wither call term out of offer to make good yourself.

Do you have or know the previous tenant? Find out, approach them and ask for their delaps report when they left, pay them for it if need be. It will give you your starting point. You can ask to see evidence of bills, to show the work in the original delaps report.

 

[Mark T Jones]

This serves as solid advice to anyone taking on a lease to get things done properly prior to signing (including condition reports)

I can echo he advice to take good legal advice moving forward. I've had many clients in this situation over the years; some have managed to negotiate up to 50% off, others haven't.

 

[MOIC]

I think what comes out of this thread, as well as for other readers who are getting involved in a commercial lease, is that a solicitor is not the only legal person you need. Just as important (and this can be argued), is a building surveyor to report on the condition of the premises and advise you prior to signing the lease, as well as when it's time to return the lease. Reports they'll prepare will keep your eyes open to all your responsibilities and potential costs involved. Although not cheap, they will save you (potentially) thousands. They are your friend against the landlord.

 

[Duke Fame]

I think what comes out of this thread, as well as for other readers who are getting involved in a commercial lease, is that a solicitor is not the only legal person you need. Just as important (and this can be argued), is a building surveyor to report on the condition of the premises and advise you prior to signing the lease, as well as when it's time to return the lease. Reports they'll prepare will keep your eyes open to all your responsibilities and potential costs involved. Although not cheap, they will save you (potentially) thousands. They are your friend against the landlord.

The cheaper solution is to make sure you ask for the previous dilapidations report & proof of repairs.

We gave our report to the new tenant of the unit as we left with evidence that work had not been completed.

 

[MOIC]

The cheaper solution is to make sure you ask for the previous dilapidations report & proof of repairs.

We gave our report to the new tenant of the unit as we left with evidence that work had not been completed.

If a new lease was offered does the above have any relevance? Presumably the new tenant's responsibilities with regards to the property condition, starts when he/she takes on the new lease and when the property is returned at the end of the lease.

 

[Paul Kelly ICHYB]

This serves as solid advice to anyone taking on a lease to get things done properly prior to signing (including condition reports)

This cannot be repeated enough times.

 

[Duke Fame]

If a new lease was offered does the above have any relevance? Presumably the new tenant's responsibilities with regards to the property condition, starts when he/she takes on the new lease and when the property is returned at the end of the lease.

It simply helps because you have a professional report and you ask for evidence of the work done. The line in the sand is drawn.

 

[WaveJumper]

This cannot be repeated enough times.

So right, there has been thread after thread on this topic. Anyone who "wings it" thinking they are clever and saving some money by not seeking proper professional advise are just lining themselves up to get their fingers burnt in the future. A good landlord would insist on a new tenant getting proper legal advice before signing anything, I would suggest if your potential new landlord is not and acts like they are doing you the biggest favour ........ run for the hills.

 

[Duke Fame]

So right, there has been thread after thread on this topic. Anyone who "wings it" thinking they are clever and saving some money by not seeking proper professional advise are just lining themselves up to get their fingers burnt in the future. A good landlord would insist on a new tenant getting proper legal advice before signing anything, I would suggest if your potential new landlord is not and acts like they are doing you the biggest favour ........ run for the hills.

It's all very well saying that now, that's no help to the OP.

They have an issue where they are 5 years on and being done up like a kipper. It now comes to how they rescue the situation.

I've been in this situation before and asked on this very forum and IIRC, you mocked me too but someone did give some great advice to the point that we saved the majority of what the agent was trying to scam us for.

There are people on here who can help via professional qualification or simple experienced the situation before. It's not helpful to simply say the OP was a mug 5 years ago.

 

[Financial-Modeller]

It's all very well saying that now, that's no help to the OP.

They have an issue where they are 5 years on and being done up like a kipper. It now comes to how they rescue the situation.

I've been in this situation before and asked on this very forum and IIRC, you mocked me too but someone did give some great advice to the point that we saved the majority of what the agent was trying to scam us for.

There are people on here who can help via professional qualification or simple experienced the situation before. It's not helpful to simply say the OP was a mug 5 years ago.

It might be helpful to the OP if you linked to the advice that you received.

 

[Financial-Modeller]

There is a subtle difference between tenant asking for an extension and the landlord not agreeing to tenant's terms:

...We would've liked to stay on in the building, but the landlord said no to an extension of the lease...

and the landlord asking for a rent increase and tenant not agreeing to it:

...LL probably knows that we couldn't pay for the headline rental that she wants to achieve...

If the latter, and you want to stay, have you tried to negotiate mutually acceptable terms?

 

[Duke Fame]

It might be helpful to the OP if you linked to the advice that you received.

What was suggested to us is mainly listed in my previous posts.

See if the OP can obtain the previous tenants' surveyor's report, ask for proof that the work on that report was made good.

We challenged the report line by line, agreeing to make good certain items in the list ourselves as a way of bringing the matter to a close.

In our correspondence, we referred to the protocol throughout.

Evidence that the OP has complied with the terms of the lease.

OP to show very much that the OP will go to court.

Generally be an absolute pain

 

[Gyumri]

It's quite possible that the LL has spent the deposit long ago for her own business and has nothing she can return. The rent deposit deed and the repairing obligations if any under the lease should be read by the OP- that might inform her as to whether she is responsible for dilapidations and to what extent.

 

[japancool]

It's quite possible that the LL has spent the deposit long ago for her own business and has nothing she can return.

Why is that the OP's problem?

 

[Gyumri]

Because the LL is finding an excuse not to return the deposit? Either that or the OP has left the premises looking like a dump- but that can't be so because the LL is expecting to get even more rent from the premises than the OP has been paying.

 

[WaveJumper]

Of course there's two sides to every argument, and when the OP refers to the landlord in the terms expressed above maybe there's no love lost between the two parties. Landlords just like anyone else are in business to make money and at the risk of upsetting some other forum members if you don't get all your ducks in a row before taking on a lease ten to one your gonna get your fingers burnt. Its not rubbing the OPs nose in it, its for others who come along and read these threads (and there's a thread on this going on right now) and learn something of the pitfalls.

The OP as already suggested needs to get his own survey carried out (if they can get a copy of previous delaps all well and good) then negotiate and fight every point, not going to be easy but hopefully able to get that figure down to something much more agreeable.

Some interesting reading on the topic:

RICS Consumer Guide: Dilapidations | Find a Surveyor

This guide provides information for tenants and landlords on things to consider when dealing with a dilapidations claim made by a landlord at or near the end of the lease term.

www.ricsfirms.com

 

[Gyumri]

That's a good link but the starting point is to read the lease which determines the rights and obligations of the parties.

 

[Duke Fame]

Of course there's two sides to every argument, and when the OP refers to the landlord in the terms expressed above maybe there's no love lost between the two parties. Landlords just like anyone else are in business to make money and at the risk of upsetting some other forum members if you don't get all your ducks in a row before taking on a lease ten to one your gonna get your fingers burnt. Its not rubbing the OPs nose in it, its for others who come along and read these threads (and there's a thread on this going on right now) and learn something of the pitfalls.

The OP as already suggested needs to get his own survey carried out (if they can get a copy of previous delaps all well and good) then negotiate and fight every point, not going to be easy but hopefully able to get that figure down to something much more agreeable.

Some interesting reading on the topic:

RICS Consumer Guide: Dilapidations | Find a Surveyor

This guide provides information for tenants and landlords on things to consider when dealing with a dilapidations claim made by a landlord at or near the end of the lease term.

www.ricsfirms.com

Of course there are two sides in every conflict and businesses do seek to maximise profit but most businesses do not attempt to rinse their customer to the point the pips squeak. Perhaps the property letting business is slightly different to others and the Landlord and agent do not seek an ongoing customer relationship with the outgoing tenant.

That link is very good and I used that guide as damage limitation in my case.

If anyone is familiar with the podcast Triggenometry, the guys on there had a dispute with their previous landlord and basically outed the LL and agent to the extent they got their full deposit back today.

 

[Michael Loveridge]

It's probably not really necessary to involve a solicitor at this stage, as the dispute is about dilapidations, not legal liability for repairs.

What you really need to do is obtain advice from a s[specialist dilapidations surveyor. There are plenty of them around, and I would virtually guarantee that you will save far more than the cost of their advice. In fact, some of them will act on a contingency basis - i.e. their fee will be a percentage of the saving, which is a good incentive.

As it's a five year lease it will almost certainly be a full repairing lease (i.e. you're responsible for all repairs) But a dilapidations surveyor will also be experienced at interpreting commercial leases, so they will check the repairs liability for you.

Incidentally, ignore the comments about what the condition was like at the outset. Unless the repair liability is limited to keeping the property in the same condition (which it won't be) you are responsible for repairing the property even if it was in bad repair when you took it on. So even if your repairs make the property a lot better you get no credit for it.

 

[JuFoster]

Thanks for all your posts - has been very helpful in a tough week for me!

We have appointed our own surveyor now - so hopefully the beginning of fighting this dilapidations report.

We have also organised our own contractors to attend and quote - we'll be looking to make cheaper any remedial action that we are required to undertake.

It does feel like this could have been avoided if our LL had just been more open with us on her plans for the building and/or our responsibilities within the lease at the end of its term. These surveyors cost a lot in fees alone. I feel like the managing agents also push for the surveyors to get involved, and are part of the problem also.

As many have said - the main issue we've got ourselves into here was not checking our commercial lease with a solicitor when we took it out. I would encourage anyone with a commercial lease to make sure they do!

 

[IanSuth]

Thanks for all your posts - has been very helpful in a tough week for me!

We have appointed our own surveyor now - so hopefully the beginning of fighting this dilapidations report.

We have also organised our own contractors to attend and quote - we'll be looking to make cheaper any remedial action that we are required to undertake.

It does feel like this could have been avoided if our LL had just been more open with us on her plans for the building and/or our responsibilities within the lease at the end of its term. These surveyors cost a lot in fees alone. I feel like the managing agents also push for the surveyors to get involved, and are part of the problem also.

As many have said - the main issue we've got ourselves into here was not checking our commercial lease with a solicitor when we took it out. I would encourage anyone with a commercial lease to make sure they do!

Before you do repairs read the small print

We had replaced all the lighting in an office updating from old fake brass goosenecked incandescent fittings to a mix of modern uplighters and spots etc. Far better lighting quality (and quality of fitment) - when read carefully the lease meant we had to rip it all back out and restore to as was, luckily the old fittings were still sat in a store cupboard so could be refitted otherwise we would have been on the hook for some kind of deduction from deposit.

We also got into an argument over damage to a ceiling that was caused by a leak in the roof valley - our lease covered repairs to eaves height the LL was responsible for roof - the ceiling damage was as a result of his failure to keep the roof in good shape

 

[MBE2017]

I had a small shop where the landlord tried to get myself to literally rebuild the property, I casually mentioned my legal insurance cover would argue it over the next few years in court and I wasn’t too bothered, he ended up happy to see myself go.

I had no legal cover at the time, but I did have plenty of communication stating the condition of the property and photographic evidence, I just thought it silly to spend a few thousand wrecking the place back to its original condition, it seems he thought so too.

 

[Duke Fame]

Thanks for all your posts - has been very helpful in a tough week for me!

We have appointed our own surveyor now - so hopefully the beginning of fighting this dilapidations report.

We have also organised our own contractors to attend and quote - we'll be looking to make cheaper any remedial action that we are required to undertake.

It does feel like this could have been avoided if our LL had just been more open with us on her plans for the building and/or our responsibilities within the lease at the end of its term. These surveyors cost a lot in fees alone. I feel like the managing agents also push for the surveyors to get involved, and are part of the problem also.

As many have said - the main issue we've got ourselves into here was not checking our commercial lease with a solicitor when we took it out. I would encourage anyone with a commercial lease to make sure they do!

Keep us informed!!!

It's certainly worth getting a report at the outset but so many of us are naive (me included). It's also worth employing a surveyor do do a report at the end, then when it comes to court, there are two parties risking their reputations which they will avoid at all costs.

 

[LiveNetworks Ltd]

I would keep the correspondence open and only write WP if there is a reason to do so - WP correspondence can't be shown to or read by a judge

Thats not true. All correspondence can be used as evidence in a case.

Without predjudice, is only correctly used when making an offer to settle, the 'without prejudice' element meaning that your offer and any matters conceded in the offer are not available to be used against you in a case.