Dispute Resolution

In June of this year, Blackstone paid almost 19 billion dollars to buy a collection of warehouses in the US.  They were no ordinary warehouses, however, but rather state of the art logistics centres strategically placed in cities and towns.

In Europe, Mileway was formed out of the Onyx fund at the end of September, focussing on last mile logistics.

Sheds are hot property at the moment.  And with good reason.

EVOLUTION OF THE SHED

As we become more enamoured with the online offering and more demanding in our expectations, retailers have to keep up if they are to survive.

The sheds of yesterday are no longer enough.  Sophisticated automation is required.  Multi-levels are becoming necessary.  Significant data and power cables need to be available.  The sheds of today are being fitted out by their tenants to a high specification, at significant cost.

LONGER LEASES

That tends to lead to longer leases.  Nobody wants to invest all of that money only to have to move out in five years.  Leases of 18 to 20 years are starting to appear again.

DILAPIDATIONS RISK

But where does that leave the landlord who has built the shed?  In 18 or 20 years the technology that is cutting edge today will likely be obsolete.  It will be unwanted by a new logistics tenant and expensive to remove.  How does the landlord protect against being landed with this cost?

Dilapidations.  It needs to make sure that it’s removal and reinstatement clauses are well drafted.  It needs to include provisions such as payment clauses for dilaps, including for rent equal to the time it would take to remove the fit out.  And it needs to ensure it is not liable for extraordinary repairs.

If it protects itself on dilaps, the landlord can future proof its shed.  At least until the first flying warehouse is built…

Matthew Farrell

Partner at Brodies LLP
Matthew deals with complex and high value real estate disputes for a wide variety of clients, from property funds and corporate occupiers to developers and public bodies. He is especially well known for top end dilapidations disputes.
Matthew Farrell