Commercial leases are very different to residential tenancies and typically have a number of lease clauses which relate to lease end dilapidations claims. The main difference is that there is not normally a ‘fair wear and tear’ clause in a commercial lease. At lease end, landlords are entitled to expect the building to be given back in a state compliant with the lease clauses and are to bring a claim, often of a financial nature, against tenants that do not comply with their lease clauses.
These types of claim are so common that the courts have a specific set of guidance related to these claims, called the “Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy” – understandably, more commonly known as the ”Dilapidations Protocol”.
What can a landlord claim for?
The main things a landlord can claim for under dilapidations relate to the following:
- Failure to redecorate
- Failure to comply with the law
- Failure to reinstate alterations
- And on-costs
As with anything related to dilapidations, it does depend on the exact wording of a lease. Therefore this article should be used a guide. For advice on a specific lease, you must seek qualified professional help. A landlord should only claim for breaches of the lease that will cost them money to put right, or which will reduce the value of their property.
Schedule of Dilapidations
A schedule of dilapidations details the works a landlord believes are necessary for the tenant to comply with their lease obligations. We normally view a schedule of dilapidations as a record of technical breaches of the lease, as it is not always the case that breaches of the lease will cost the landlord money to rectify, or make them otherwise suffer loss.
The dilapidations protocol requires landlord and tenant or their surveyors to meet on site and discuss the schedule within 28 days of the schedule being received by the tenant. The tenant or their surveyor are also required to provide a written response to the landlord or their surveyor within 56 days of the tenant receiving the schedule.
This demonstrates that the court system expects the schedule of dilapidations to be a starting point, and requires the landlord and tenant to consider where the landlord’s true loss resulting from breaches contained within the schedule of dilapidations arises.
This means that just because the tenant has breached their lease, a landlord cannot necessarily expect to receive compensation, especially as some breaches are inconsequential to the landlord’s position.
When a tenant has breached their lease, it does not always mean the breach will result in loss to the landlord. This is where a comprehensive understanding of buildings and dilapidations law is critical. To assess the true loss requires a detailed understanding of the claim and comparing the exact situation to dilapidations statute and case law.
While dilapidations surveyors will be involved in each stage of the dilapidations process, this is where they demonstrate real value. It is important therefore that your dilapidations surveyor really understands the law surrounding dilapidations, rather than having a passing understanding of the lease clauses and construction technology. We have a separate article on assessing loss in dilapidations which you can refer to for more details.
A landlord may incur additional costs which are not related to work items, but these can also be claimed for. One example may be the cost of appointing a contract administrator to oversee the necessary building works, or more contentiously, loss of rent. Loss of rent is notoriously difficult to prove but can be a valid claim in some instances.
Damages in lieu of VAT can be reclaimed from the landlord, so long as the landlord has to pay VAT but is unable to reclaim it from HMRC.
How you can contact Harrison Clarke
Call our friendly, expert and highly qualified surveyors on 023 8155 0051, or email us at email@example.com. We would welcome the opportunity to help with any queries or needs you may have.
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