A clearer picture: Understanding common terms in dilapidations matters
Stephen Seeney, Senior Surveyor at Rund Partnership discusses the importance of understanding lease terms to help avoid challenging dilapidations scenarios.
“Some standard terms within leases can generate significant controversy when it comes to dilapidations matters, due to each party’s understanding and interpretation of the requirements. If we take the term ‘dilapidations’ on its own, you could simply define it as the value owed to a landlord at the end of a tenancy for reinstating a premises to its former condition. But in technical terms, what counts as the ‘premises’? How exactly do you define its ‘former condition’? What constitutes ‘wear and tear’ and is this relevant? When you start drilling down into technicalities, understanding the wording within a lease can be different between parties, leading to multiple issues between landlord and tenant.
Common questionable terms in leases
“Terms used in repair clauses within a lease are often questioned. There are many different ways of expressing a requirement for a property to be in ‘repair’ – for example, a lease may state: ‘The tenant shall repair the premises at all times.’ A way to accurately assess whether something is simply in ‘repair’ is to look at whether it can still serve its main purpose. For instance, a window’s main function is to stop adverse weather conditions affecting a building’s interior, as well as providing a source of light. It is arguably in ‘good repair’ condition so long as it can still do this – if there is a requirement for it to be in good repair and condition, then the requirements are more onerous.
“Another term which can cause disagreements is ‘vacant possession’. This is a condition within a lease which stipulates that a premises must be empty on the day of completion and free from anything which could prevent a third party taking beneficial occupation. This could include workmen, skips or even third party contracts for services.
“Both parties should understand the definition of the ‘premises’ from the outset. This is another area which can cause conflict. For example, a lease may state that a ‘premises’ is defined as a property and all its original fixtures and fittings, excluding the tenant’s own fixtures. In the recent dilapidations case of Capitol Park Leeds plc v Global Radio Services Limited, the tenant stripped out several fixtures from the premises to achieve a ‘shell condition’ when presenting it back to the landlord. However, this meant the landlord suffered loss in replacing their original fixtures and fittings. Therefore, the tenant had technically not handed the premises back in compliance with their obligations.
“The term ‘fixture’ can also be a source of conflict. For example, a carpet could often be classed as a fixture if it is securely fixed to a property by nails or glue. However, if the carpet rests on its own weight and is only secured in a loose format, such as with tackifier, it could be considered a chattel. A chattel is an item which is not physically attached to the premises, and ordinarily it must be removed at lease-end. This can cause confusion where a landlord’s surveyor requests the replacement of carpet tiles and a tenant could potentially just remove the carpet and be in compliance.
Gaining a clear understanding through expert surveyor services
“Every lease is different, which is why it is important for all parties to be clear on what terms have been agreed to in relation to a specific property. Our expert surveyors at Rund can help landlords and tenants eliminate any subjectivity and provide a clear picture of property condition requirements. We can also help both parties avoid any unwelcome surprises at the end of a lease by assessing any likely dilapidations claims and providing strategic advice to rectify them.
“To help remove any subjectivity even earlier in the process, a detailed schedule of condition can be undertaken to accurately record the condition of a property at lease commencement. At Rund, we always ensure an intricate examination takes place and all condition elements are accurately captured. This gives both landlords and tenants clarity on the lease end expectations from the start of the lease and avoid costly disputes later down the line.
“Ultimately, assumptions should be avoided at all costs when reviewing terms in leases. If a term is not clear from the outset, it is very likely to be disputed later down the line – causing all manner of difficulties when leases come to an end. On the other hand, it is easy to be overwhelmed by all possible definitions of terms within a lease, so surveyor services should always be considered to help ease the process and result in a seamless handover from tenant to landlord.”