Q&A: End of Lease - Repair and Dilapidations

July 17, 2012

I am approaching the end of my five year commercial lease and think that I need to be making some repairs to the property before I hand it back to the landlord but I don’t want to pay for more than I need to.  My lease just says that I need to keep the property in good repair – what should I be doing? 

A commercial tenant will usual have an obligation in their lease to return the property to the landlord in the standard of repair that has been required during the term of the lease.  Here are some of the key points you need to look out for when considering any possible remedial works before you vacate:

  • Make sure you are absolutely clear on the extent of the property as defined in your lease and illustrated by the lease plan.  Check the written description of the property in the lease.  This should give you clarification on, for example, your responsibility for the windows/window frames and roof.  If you have rented an entire building then this is likely to be a straightforward full liability but in a multi-let building you will need to be more careful.
  • Check whether your liabilities were limited by a schedule of condition and/or inventory agreed with your landlord at the start of the lease.  This may be in writing or include photographs and should provide clarity on the minimum standard of repair in which you must return the property.
  • Remember that ‘repair’ means fixing any defects in the physical condition of the property by renewing or replacing parts.  It does not imply making improvements or renewing or replacing the whole of the property.  However, note that if your obligation is “to keep in repair” then this will require you also to “put” the property into repair which, unless limited by a schedule of condition, could mean an obligation to return the property to the landlord in a better state of repair than that in which it was when you took up occupation.
  • If in doubt, take advice from your solicitor or a surveyor as to the extent of your liability to avoid your landlord making a claim for damages for dilapidations if it is not happy with the condition in which you return  the property.  Make sure you keep your own photographic record of the condition of the property when you return it at the end of the term. Any claim for damages  will be for the costs the landlord incurs in carrying out remedial works it considers necessary to bring the property up to the appropriate standard and also any loss of rent during the time the works are being carried out.  If you can prove that any works are not necessary, that the landlord’s reversion has not diminished in value due to the disrepair or that the landlord has plans to demolish or structurally alter the building shortly after the end of the lease then damages would not be payable.
  • Finally do not leave the issue of dilapidations until the last minute.  The last thing you want is to have continued liability after the end of the term.  Either contact your landlord directly or via your surveyor or solicitor and try to reach an agreement as soon as possible.

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