With the pressure on cash continuing, we are seeing an increase in terminal dilapidations disputes. Tenants who don't have the money available to pay dilaps are turning to their lawyers for help to mitigate liability. That usually leads to an increase in legal based arguments.
With that in mind, we thought it would be useful to set out our top ten tips when preparing a terminal dilaps claim.
- Make sure you serve your schedule in time if notice to remove alterations needs to be given before the end of the lease.
- Your schedule should also be served in accordance with the terms of the notice clause under the lease.
- Don't forget to check licences for works – they are often separate agreements that can affect a tenant's liability to reinstate. Their terms need to be followed.
- Look out for payment obligations. They often have to be activated at the expiry of the lease and can increase terminal dilaps recovery, sometimes substantially.
- If the payment obligation has a certification provision, it can prevent the tenant from making almost any challenge to the schedule.
- Don't include any provisional items in the schedule. If you need to get the electrical test, lift report or asbestos survey done, do it and recover the cost. Don't claim the cost of the report and your guess at what works it might say need done.
- The standard of good repair and condition is the condition as one would expect to find the premises had they been managed by a reasonably minded owner, having regard to their age, character and locality.
- Loss of rent is recoverable if you can show that but for the terminal dilapidations, the landlord would have been able to let the premises earlier than it can in its current condition. Given the market conditions over the last two decades, landlords have got out of the way of including loss of rent in their claims. Many legitimate loss of rent claims have likely been overlooked as a result.
- If you use an M&E expert, make sure they understand dilaps and how the repairing standard in a lease works. You'd be surprised at how many don't.
- Take pictures when you inspect, and reference them in your terminal schedule as evidence of the defect.