Dilapidations Claims for Commercial Leases

In a commercial property lease agreement, a tenant is required by law to repair any damages made in the property at the end of their tenancy. This includes reinstating any redecorations or alterations made to the property during the lease period. For a tenant to take care of the repairs and alterations, a landlord must send them a dilapidations claim stating all the repairs needed on the property.

What Exactly is a Dilapidations Claim

Dilapidations is a claim issued to tenants by their landlords for any damages that they are obligated to repair according to the lease agreement. The landlord can make a dilapidations claim at the end of the lease period or during the lease period. The dilapidations claim document, usually referred to as a Schedule of Dilapidations, contains all the alterations made to the commercial property under lease and their reinstatement. It also includes all the necessary repairs to damages made by the tenants during their tenancy.

Depending on the lease agreement, the tenant may decide to repair the damages stated in the dilapidations claim on their own, or the landlord can decide to fix the damages then charge it on the tenant. The landlord can also ask to be refunded for any damages in the commercial property. However, the repair expenses made by the landlord in the dilapidations claim could be quite expensive. In some cases, the amount could go up to a total of 18 months worth of rent. Due to the high cost of repair that may be quoted in a dilapidations claim, tenants should be aware of any dilapidations claim before leasing any commercial property; you do not want to receive an unexpected hefty claim at the end of your tenancy.

When looking for a commercial property to lease or rent, you should discuss the dilapidations claims with your prospective landlord. It should be clear on your responsibilities in dilapidations claims at the end of your lease, and every detail should be put down in writing before leasing any commercial property. This way, you will save yourself any unanticipated expenses when your lease ends or any unclear damages quoted by the landlord. You can, however, avoid huge costs in the dilapidations claims for your commercial property, through the following ways.

Get Familiar with the Dilapidations Terms in your Lease

Before entering into a lease for any commercial property, ensure that all the dilapidations terms in your contract are clear. Check the terms for repair, redecorating and damages as stated in the terms and ensure you discuss them with your landlord before leasing a commercial property. This way, you will be in agreement with your landlord on your obligations when your lease ends.

Preparing a Schedule of Condition before leasing can be useful too. A Schedule of Condition will outline the state of the commercial property before leasing it. This will limit your landlord from claiming dilapidations for a property that was not in good condition. Inspect the entire property and state the description of its condition and confirm with your landlord that the information is accurate. You can also take photos to back up your descriptions regarding the condition of the commercial property. A Schedule of Condition is composed by a surveyor, who will help you inspect the condition of the property before you can go ahead and rent it or lease it.

For landlords leasing a commercial property to a start-up company with no assets, you could consider asking for a guarantor if the dilapidations terms state that the tenant is responsible for the dilapidations expenses.

Ensure the Terms of the Lease are Clear

Ensure that every clause in your lease agreement is clear to avoid any dilapidations complications with your landlord in the future. Some clauses may state that it is the responsibility of the tenant to maintain the commercial property after a short time within the lease period. Commercial property maintenance duties may include painting the entire property after a period of time. If the tenant does not do so, according to the lease agreement, the landlord has the right to include the painting expenses and any other maintenance expenses in the dilapidations claim.

To avoid unnecessary expenses in the dilapidations claim, ensure you read through the lease agreement carefully and discuss any dilapidations clauses with your landlord that may not be clear.

Confirm if you are Allowed to Make any Changes to the Commercial Property

If you require some changes to the property, ensure that you follow what the lease agreement says about that. Some dilapidations claims may require a tenant to remove any changes made to the property and reinstate it to its previous condition. Some changes to the commercial property may seem necessary to raise the value of the property, but if the changes have not been authorised by the landlord, then the landlord has the right to claim dilapidations for the changes in the property.

If your lease agreement states that you need permission from your landlord to make any changes to the commercial property, then let it be in writing. Alternatively, you can obtain permission officially through a License to Alter document. This will save you extra expenses from being included in the dilapidations claim for changes you thought were necessary to the property.

What to Do If You Receive a Dilapidations Claim

At the end of your tenancy at the commercial property, your landlord may issue a dilapidations claim, as per the lease agreement. When you receive one, you should quickly send a reply to the claims stated in the Schedule of Dilapidations document. A professional surveyor with knowledge in dilapidations matters will help you send a reply on the dilapidations claims against you. After reading through your lease agreement, the surveyor may even try to negotiate and reduce the amount quoted in the dilapidations claim.

For landlords, a surveyor can also help you come up with a Schedule of Dilapidations document to hand over to your tenant. If you feel that your commercial property is not in the state it was when leasing it; then a surveyor will help you formulate a dilapidations claim document, which will require your tenant to pay for any claims stated according to your lease agreement.

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