Strategic Dilapidations Report
Executive Summary Example
Summaries are not ideal as they try to précis often quite complex subjects into a few paragraphs nevertheless here we give a summary of the problems and potential problems with regard to the Interim Dilapidations served and how we would propose is the best way forward.
1.0) The Lease
There are many elements that make up the lease, the ones that we feel are the most important are:
1) Repairs
2) Redecoration
3) Reinstatement
4) Statutory Regulations
5) Yield Up
2.0) Not a Full Repairing and Insuring Lease
In this particular case we were pleased to see this is not a Full Repairing and Insuring lease (FRI) and you have exclusion clauses which we were very pleased to see (and as you rightly state) 4.1.1. to 4.1.6 identifies that you are exempt from carrying out renewal, replacement or repair to the structure including the roof and the load bearing walls and timbers and foundations and drains.
We would broadly interpret this as meaning that you are responsible for the surface finishes such as the roof tiles and the plaster. On the services front you are exempt from the electrical wiring, cellar cooling equipment and central heating and externally resurfacing of the car park.
These are excellent exemptions similar to an old brewery tenancy agreement in many ways.
3.0) Cause and effect
From what we understand you have over the years argued what we would term cause and effect i.e. that due to the condition that the brewer/property owner has left their parts of the building in, it has not been possible to carry out your obligations properly, for example:
It is not possible to make the roof watertight as the structure beneath has problems.
Whilst we can see these are strong arguments, you now have two weeks before the end of the lease and have had an Interim Schedule of Dilapidations served upon you with costs in the region of £40,000 plus other costs (which we will go into later), it could be costly to argue as you pay the fees.
4.0) Interim Dilapidations - what does this mean to you?
Leases are written by the landlord and generally tend to favour their viewpoint and Dilapidations Schedules are produced by the landlords surveyor and again favour their viewpoint and in particular in relation to pricing where you generally have what we would consider to be Rolls Royce pricing.
5.0) You pay the fees for both brewer/property owner and yourself
Unfortunately as with most leases, if you do negotiate after the end of the lease you will not only pay the costs of your surveyor (or yourself if you wish to carry out the negotiations) but also the cost of the landlord’s surveyor and any associated professionals such as solicitors so the negotiation process can be expensive.
6.0) Interim Schedule of Dilapidations - additional costs
It should be noted that this is an Interim Schedule of Dilapidations and as such is not conclusive. As you have already discovered with the re-issuing of the Interim Dilapidations with the barns included, the Interim Dilapidations are open to additional elements being added.
7.0) Interim Dilapidations fees not mentioned
Another area that you need to be aware of is the Interim Dilapidations is not a complete claim, there are many additions we can see that haven’t been included within the interim Schedule of Dilapidations, all of which cost money!
For example you would typically have additional surveyor’s fees for tendering the proposed work and managing it typically anything between 8% and 20%.
Another example of additional costs would be loss of rent during the time the work is being carried out, say 4 – 8 weeks. You are looking with these two elements alone at considerable additional costs.
8.0) The term Interim Schedule of Dilapidations and Final Schedule of Dilapidations
Although the two terms are very similar, we would re-emphasise that this is an Interim Schedule of Dilapidations and as such is subject to alterations until a Final Schedule of Dilapidations is served. If the brewer/property owner was intending to serve a Final Schedule of Dilapidations before you left the property we would have expected it to be served by now. It is more typical for a Final Dilapidations to be served once you have left the property.
9.0) Dilapidations tactics one
From our experience from the property owner’s point of view most property owners believe they get the best settlement from a monetary only settlement which they will instigate after the lease has ended.
10.0) Property owners are under no Dilapidations obligation
The common mistake is that tenants/operators believe that the property owner/brewer have to provide them with the Schedule of Dilapidations - they don’t. Even the Dilapidations protocol that has been brought in to help make this a fairer game only require under the terms of their guidance for a Dilapidations notice to be served within 56 days of the end of the lease.
11.0) Dilapidations protocol and the wild west of Dilapidation claims
A Dilapidations protocol has come into place over the time that you have had this lease. It has been instigated by the Royal Institution of Chartered Surveyors however it is currently for guidance only.
The idea was to make Dilapidations claims a fairer game and to some extent it is working with giving typical times things should be carried out in, for example a Dilapidations notice should be served by the landlord surveyor within 56 days of the lease ending and it should be responded to by the tenants surveyor within 56 days of receiving it.
We have now had several times quoted to us by property owners/surveyors that this is only guidance and as yet not statutory however it is becoming more commonly used.
12.0) The reasons why property owners like monetary only solutions
For a property owner a monetary only solution usually mean that any work is priced within the Schedule of Dilapidations as what we would term as Rolls Royce prices.
Whilst in theory the property owner is not meant to make a profit out of Dilapidations claims you can comment that this is an expensive process for a tenant to argue because as mentioned you pay for both your own professional fees and also your property owners/brewers/landlords fees.
It is best for this reason to negotiate a settlement directly with the property owner or with the property owner’s surveyors depending upon how they wish to operate. Most operate via Dilapidations Surveyors or alternatively to carry out the work required under the lease yourselves before the end of the lease and this is the way which we would recommend proceeding.
13.0) Ending a lease with minimum costs
From our experience we have found over the years that it is far better to carry out as much work as possible that falls under what we would term negotiable Dilapidation claims issues.
14.0) Negotiation of an Interim Dilapidations claim
It is good to have had an Interim Dilapidations claim served on you although it is an Interim rather than Final it is a good starting place.
Although as explained you could be served with further Interim claims, we would like to get a Final Dilapidations notice served but we haven’t got any legal grounding for this. As mentioned they have 56 days after the end of the lease to carry this work out.
15.0) What this means to you
To reiterate what this means to you, you need to act very quickly on the following items:
1. Clear the building
2. Get contractors in place to repair and redecorate as per your lease requirements.
3. This needs to include the cleaning of the floors and the ceilings.
4. Get the property owners/the brewer/landlord on board with the fact you are carrying out works.
THINGS YOU NEED TO DO AS SOON AS POSSIBLE:
1) Write to landlord and landlord’s surveyor
Put in writing to the landlord and the landlords surveyor that you intend to carry out works and state specific dates when you will be holding site meetings to review progress and invite them to come along to the meetings.
As you have so little time we have asked in the letter/email for them to give it their urgent attention and we would also advise that within a few days you need to send a second letter/email saying that you haven’t heard from them as yet and re-emphasise you intend to carry out the works and re-emphasising the dates when you wish them to visit the property.
2) Remove all stored items and fixtures and fittings relating to the business that are yours
You need to clear the property as quickly as possible of any stored items, etc.
We would add that at the time we walked around with you it didn’t look like anything had been carried out; you do need to move quickly.
3) You need to tender/get quotes for the painting work, external work and internal work and start the painting almost immediately
Externally you need to clear gutters first at this time of year and wait for some warmer days. Internally we would recommend that you continue trading and removing fixtures and fittings.
The easy part of this is getting the internal work carried out as it is not weather dependent. From what we have seen we do feel you can work this around your business.
External painting may be more difficult as you will be waiting for good weather. We would recommend at this time of year you do clear your gutters so that if it does rain during the course they don’t overflow onto the paintwork.
4) You need to make repeated efforts to get the landlord or the
landlord’s surveyor to meet you at the property.
This needs to be done in writing as well as verbally. Please see letters in the Appendices. You of course have got to add your own headed paper to these.
ACTION REQUIRED: Use the format of the letters in the Appendices of this report.
5) The art of negotiation
Remember that you have to negotiate. We do like the phrase
‘win friends and influence people’.
6) Tests and reports
You normally need to have tests and reports on all services however we note that it would appear you are excluded from liability on these.
We would query this in writing as you still may need to have tests and reports provided at the end although you don’t have the liability for maintaining them.
7) Reinstatement covenant (requirement)
We are assuming that you haven’t moved any walls, etc. without permission therefore don’t have to put any walls, etc back.
