Dilapidations Can Be a Minefield of Litigation; Stephen Hing, Director and Head of Project Management and Building Surveying at Drivers Jonas Deloitte's Birmingham Office, Explores the Complex Issues Surrounding Dilapidations

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Byline: Stephen Hing

Stephen Hing, director and head of Project Management and Building Surveying at Drivers Jonas Deloitte's Birmingham Office, explores the complex issues surrounding dilapidations Dilapidations claims, whereby a landlord seeks a lease exit payment from a tenant on the grounds of disrepair and technicalities of wording in typical leases, are becoming more frequent and more heavily contested. Occupiers are often not renewing leases and operating breaks to reduce costs, leases are generally getting shorter and landlords are facing falling capital values and lower levels of demand for premises. All of this makes dilapidations a harder fought issue as both sides argue over often significant sums of money.

However, many occupiers do not fully understand the pitfalls and potential counter arguments as lease ends are not a common occurrence other than for large businesses. Dilapidations cases are a mix of technical building defect analysis, costing, law, valuation and negotiation tactics.

Break clauses in particular can be a minefield.

Notice usually has to be served in a prescribed time. Six months means six months, not six months and a day. If it's a window then its easier but notice must be served on the actual landlord. Straightforward, if you know who it is but harder if it's a special purpose company based in an offshore tax haven, who employs an asset manager who in turn employs a managing agent, particularly if the building is sold a few days before your break notice is served! This can also be difficult for the tenant if the tenant name on the lease is a subsidiary which has since changed its name.

There are a number of cases where a tenant has served a break in the wrong company name or not on the correct landlord and has failed to operate a break as a result. To make matters harder, the landlord is under no obligation to help. …