Commercial Property Leasing and Dilapidations

Dilapidations are the breaches of lease covenants that relate to the condition of a property during the term of the tenancy or when the lease ends. For the Building Services Engineering elements the claims for dilapidations include the remedy for disrepair, reinstatement of any changes made to the landlords plant and equipment, or removal of plant and services installed by the tenant. These claims are drawn out by assessment by the engineer of the tenants lease obligations. Building services systems require specialist advise due to their complexity, shorter life cycle than the building and its fabric and health and safety, statutory and legislative implications.

Claims are made at or near the end of a lease although consideration before an agreement is commenced should be undertaken to reduce the risk of dispute. Important considerations are as follows;

  • Building services condition and serviceability should be understood by the landlord at the start and end of the lease
  • The tenant should complete due diligence to ensure they are not taking on existing dilapidations liabilities
  • The time frames and liabilities for completing dilapidations should be understood
  • For services in poor or aged condition capping of the service charge should be considered
  • Tenants must understand their maintenance obligations and provide evidence that these have been or are being fulfilled
  • Operation and maintenance manuals, record drawings and specifications and commissioning documentation should be available for both landlord and tenants plant and services

The value of property assets are preserved through dilapidations advice and compensation must be sought by landlords when tenants do not comply with their lease obligations. Tenants also need advise on the validity and size of landlords claims.

Liabilities should be considered before, during and at the termination of leases by way of specialist Building Services Engineering Condition Surveys and Reports.

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