We have been involved twice recently in matters where tenants have moved out of commercial premises and have then been served a Schedule of Dilapidation, with a bill running into tens of thousands of pounds, to put the Property into good repair.
Repairing obligations in leases fall under two categories: Full Repairing and Insuring (FRI), meaning you as tenant are responsible for the whole building both internally and externally, or Internal Repairing and Insuring (IRI) where you are only responsible for the interior. A dilapidation schedule can be served on either lease type however, it is far more onerous if your lease states that you have FRI obligations.
Repairing obligations mean that as tenant you have a responsibility to maintain the property in a good state of repair and redecoration whilst in occupation.
At the end of the lease this obligation will mean that the property must be given back to the landlord in a good state of repair and redecoration. That may mean that the stain on the carpet, or a dint in a door which was there when you moved in, may become your responsibility to repair.
What can be done about this? How can it be prevented? If you are considering taking on a commercial lease, you should ensure that a Schedule of Condition is carried out by a Chartered Surveyor and attached to the Lease when you signed on the dotted line.
This Schedule of Condition, is prepared from an inspection of the Property you are about to lease, most of which take a day or more to complete. It is in a prescribed form, with attached photographs, detailing any signs of wear and tear or disrepair at the time the Lease was signed.
With this Schedule you will then have an obligation to return the property to the Landlord in the state it was in recorded by the Schedule of Condition. For example, you take on a lease of a property with an office that has a worn and stained carpet: with a Schedule of Condition, it states the carpet was worn and stained, therefore if it is in no worse condition than in the Schedule of Condition when you vacate the premises, the Landlord cannot make you replace the carpet.
Without the Schedule of Condition you have no evidence that the carpet was worn and stained when you signed the Lease and you may be liable to replace the carpet with a new one which will cost you money.
A Schedule of Condition will cost a few hundred pounds depending on the size of the building you are going to let, but in the long term it may save you tens of thousands of pounds that you simply haven’t budgeted for.
If in the future you are served with a Schedule of Dilapidation at the end of the Lease and you didn’t have a Schedule of Condition, it is not too late to do something about it.
Again a Chartered Surveyor can help you by preparing a Response to the Schedule of Dilapidation. This will involve the Surveyor inspecting the Property on your behalf and preparing a Schedule which provides your own estimates for the cost of works, or disagreeing with the Landlord’s Surveyor that a certain element of repair work is necessary.
Your Surveyor can then enter into negotiations with the Landlord’s Surveyor to try and negotiate a settlement term on your behalf. Now reading this may leave you thinking, “are Landlords allowed to do this?” the simple answer is yes, they are.
As a tenant, if your lease is coming to an end you should try to be as proactive as possible with regards to your repairing obligations up to a year or more before the end of your lease. Think about what works you may have to do if you leave at the end of your tenancy, you may even want to instruct the advice of a Surveyor or enter into talks with your landlord before a Schedule of Dilapidation is served.
Our Surveyors are always happy to have a chat about your situation and/or the repairing obligations in your lease.