Virtually all commercial leases contain an obligation for the property to be returned to the landlord at the end of the tenancy in a good condition and state of repair. But who decides what constitutes a good state of repair? What exactly are the obligations of the tenant? What can a landlord demand?
‘Dilapidations’ describes the items in disrepair which are covered by the tenant’s obligations to maintain in the lease. The obligations can be set out, among other places, in repairing covenants, decorating covenants, reinstatement requirements (dealing with alterations made by the tenant) and terms which cover ‘yielding up’ (returning the property to the landlord at the end of the lease term).
When there are Dilapidations issues, the tenant has breached these covenants and the landlord is entitled to be compensated.
Because Dilapidations are breaches of covenant, there can be costly consequences. In the worst instance the landlord can enter the property and perform repairs themselves; a tenant may even forfeit the lease.
Wording of the covenants such as ‘good condition’ and ‘in repair’ have subtle meanings creating different levels of responsibilities. Further, if an unwary tenant takes a property in a poor condition they may be responsible for returning it to the landlord in a better condition than they received it.
It is therefore vital a potential tenant takes advice to fully understand what they are liable for before they take a lease.
When enforcing repair covenants there are various options: claiming damages, ending the lease through forfeiture, performing the repairs and charging the tenant recovering by way of debt, or perhaps, in rare cases, obtaining a court order forcing the tenant to comply. Much depends on the nature of the breach and whether the lease term has ended or not.
Note though a landlord cannot profit from any damages – under Section 18(1) of the Landlord and Tenant Act 1927 the amount claimed must only relate to the actual loss. It is also unreasonable to expect the whole property to be in ‘as new’ condition, so a ‘discount for betterment’ may be applied. If there are plans to re-develop the property at the end of the lease any damages will be limited, and any repairs a landlord undertakes themselves leaves the landlord liable for those repairs in law.
Landlords must therefore seek advice as to which remedy should be sought and what procedure is to be followed to ensure the claim is made to the extent allowable under the lease.
If you are a landlord or tenant concerned about Dilapidations or repair covenants, contact us for clear advice on where you stand.
The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.