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Dilapidations: a two-way street

April 2017 in Blog

Managing dilapidation claims can be like getting blood out of the proverbial stone; especially where tenants are not aware of their lease obligations, which causes headaches for many a landlord.

The receipt of a dilapidation claim by an un-expecting tenant is often met with dismay and anger, frequently resulting in protracted negotiations - which are of no benefit to either party.

But whose fault is it anyway?
Both landlords and tenants have an obligation throughout the term of the lease to protect the property - and yes, this should commence even before the lease is signed. The trusted road to successfully negotiate a dilapidation claim is:

  • Having an unambiguous lease, in clear terms, detailing repairing, reinstatement, decorating and yielding up covenants; baffling and drawn out legal terms are unnecessary
  • Understanding the intentions of the instructing party is critical in improving the chances of favourably concluding a claim
  • The appointed surveyor should be part of the wider team; there have been many instances of speculative planning applications damaging dilapidations negotiations with tenants raising supersession defences
  • Carefully considered and specified refurbishments can minimise a supersession defence from the tenant; early advice can assist in tailoring future aspirations for the building
  • For new-build properties, a clear base-build specification should be included in the lease
  • Be helpful with any proposed tenant alterations; advise on the reinstatement obligations and be clear on the extent of potential dilapidations costs
  • Be proactive; complete annual inspections and meet your tenant to maintain a dialogue on the potential for dilapidations claim and pre-emptive action
  • Early indications from property managers can identify potentially financially unstable Tenants;  in these cases interim remedies such as repair notices or interim schedules of dilapidations may be appropriate so as to protect the asset 
  • Once a schedule has been prepared early on in negotiations specify and tender the works; this further quantifies the loss and demonstrates to the Tenant that the Landlord is serious about undertaking the works
  • Set out and agree a timeline for the dilapidations process in the run-up to lease expiry bearing in mind a good tenant relationship = higher chances of retention
  • Help the tenant with their dilapidations; can they carry out the works, or would they be happier with agreeing a monetary settlement to cover costs? The most effective way to achieve swift monetary settlement is to ensure costs are reasonably assessed 
  • Dispute Resolution -f the two surveyors cannot agree then consider the available options; as an alternative to legal action the RICS operate a dilapidations dispute resolution service - each option has its place and this should be assessed on a case-by-case basis.

Three qualities to ensure success
Ultimately, there are numerous ways to successfully negotiate a dilapidations claim, however, with foresight, willingness and persistence a landlord can achieve a successful outcome without protracted negotiations.

To find out how our Building Consultancy team could help you with managing dilapidations claims, or our how our Property Management team works closely with clients and tenants to enhance occupier relations please do get in touch, we’ll be happy to help.