Speak to one of our advisors directly
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Laurie Thomasson
Mark O'Neill
Speak to one of our advisors directly
Every search is led personally by Mark or Laurie, with the expertise and the time to give your brief the attention it deserves.
Laurie Thomasson
Mark O'Neill
May 5, 2023
•
2
min. read
By
Mark O'Neill
Dilapidations refer to the repairs and maintenance required to bring a property back to its original condition at the end of a lease. When a commercial property lease is coming to an end, the Landlord and Tenant will negotiate the dilapidations that need to be addressed before the Tenant vacates the property. Typically, this will include a requirement to return the property back to the condition upon which it was acquired by the Tenant at the start of the lease.
In this scenario, let's assume that a Tenant has leased an office space for five years, and the lease is now coming to an end. The Landlord has carried out an inspection of the property and has identified several areas of damage and/or disrepair, which the Tenant will need to address before vacating the property.
Once the Landlord has completed the inspection of the property, they will provide the Tenant with a Schedule of Dilapidations. This document outlines the repairs and maintenance required to restore the property to its original condition. The Schedule will include a list of specific items that need to be addressed, along with a cost estimate for each item.
The Tenant will review the Schedule of Dilapidations and may dispute some of the items on the list. The Tenant will typically engage a surveyor to assess the items on the list and provide an estimate of the costs involved in carrying out the repairs.
The Landlord and Tenant will then enter into a negotiation process to agree on the scope of repairs required and the associated costs. The surveyors for each party will typically meet to discuss the Schedule and identify areas of agreement and disagreement.
Once an agreement has been reached, the parties will enter into a settlement agreement, which will outline the repairs to be carried out, the timeframe for completion, and the costs involved. The agreement will also specify any other conditions or obligations that the Tenant must meet before vacating the property, such as removing any fixtures or fittings that were installed during the lease term.
The Tenant will then carry out the necessary repairs and maintenance, following the agreed-upon schedule and using contractors approved by the Landlord. Once the repairs are completed, the Landlord will carry out a final inspection to ensure that the property has been restored to its original condition. If the Landlord is satisfied with the repairs, the Tenant can then vacate the property and hand over the keys to the Landlord. Alternatively, the parties may agree to the Tenant paying the Landlord a capital sum equivalent to the agreed value of the settlement agreement, and negating the need for the Tenant to complete the works, following which the Tenant can then vacate the property and hand over the keys to the Landlord.
Overall, dilapidations negotiations can be complex and time-consuming, but they are a necessary part of the process of ending a commercial lease. The key to a successful negotiation is to engage experienced professionals, including surveyors and lawyers, who can provide guidance and support throughout the process. Having a good property agent acting for the Tenant when first acquiring the property would also ensure that the initial negotiations contained an agreed condition for which the property should be returned, thereby providing protection against surprises or unscrupulous intentions at the end of the lease.
Image by
Karl Solano
