Dilapidations

 

 

This is the liability imposed by a lease on the tenant to re-instate property leased to the condition in which it was, when originally taken. It can be a substantial liability and should never be underestimated by an outgoing tenant.

 

The works can include taking out partitioning and reinstating alterations. Carpets and ceilings routinely have to be replaced, decorations made good and any specialist computer or telephone wiring removed. The costs of such works can be dramatic for a tenant moving to other premises.

 

Whilst short leases can offer tenants the opportunity to grow or shrink into different premises as their business changes, there are problems. Clearly if a tenant has only moved in three years earlier the initial tenants fit out cost is often almost duplicated on leaving. It should be noted that these works should be completed before the tenant hands back possession or the landlord can carry out the works and charge the tenant his professional fees. If the works continue after the expiry of the lease then the landlord is entitled to charge rent for the premises after the expiry date until the works are completed.

 

It is sometimes possible to negotiate a Schedule of Condition to fix the condition of premises at the start of a lease. Fair Wear and Tear clauses can be negotiated into new leases to mitigate a tenants later liability for dilapidations.

 

For these reasons, professional advice is necessary on taking new premises and indeed on vacating them to ensure that such costs are minimised.