Dilapidations claims - an issue that can affect landlords and tenants

With second hand office space dominating the East Midlands market, Mike Thorne, director at Innes England, warns that dilapidations disputes could be on the rise in the region.

According to research conducted by the Estates Gazette, some 80 office leases covering 129,000 sq ft of space are to due expire in the first half of 2015 – an increase of nearly 250 per cent compared with 2012.  Such a dramatic increase could also see both landlords and tenants faced with the issue of dilapidations and the potential to incur unexpected costs.

During the past year, the building consultancy team at Innes England has been approached by a number of clients – both landlords and tenants – seeking advice on the issue of dilapidations, whether that be taking preventative measures or finding a solution to an existing claim.

These types of claims can present complicated legal issues for all parties, so it is really important that businesses and individuals are prepared to deal with the potential problems that can arise if their lease is due to come to an end soon.

Tenants can be hit particularly hard by unexpected or significant dilapidations claims, which they may need expert help in understanding and negotiating with their landlord. For example, we recently acted on behalf of a major textile manufacturing company based in Nottinghamshire which received a claim totalling more than £600,000 so we were instructed to develop a dilapidations liability mitigation strategy and negotiate on the client’s behalf. This allowed us to save them more than 75 per cent relative to the original claim, minimising its substantial potential impact on the business.

But it is not just tenants who are at risk from such claims. Landlords can also be left out of pocket if they are not prepared to address issues arising from tenancy agreements and leases. Our team has worked with a number of landlords across the East Midlands and further afield, assuring that any claims are appropriately assessed and investors protected in the event of a claim.

As the market continues to show signs of recovery, we fully expect to see more and more dilapidations disputes as long term leases come to an end as organisations look to renew or move into expanded premises. It is essential that landlords and tenants are aware of the risks they face and that appropriate mechanisms are in place to mitigate any potential issues arising as a result of dilapidations claims – it is an essential part of the leasing mix that should not be overlooked.