Our experience is that an increasing number of Landlords are opting to carry-out the repair works at lease-end in order to prove their losses. The reasons for this are many...
• Tenants are better informed and unlikely to agree a financial settlement which would historically allow the Landlord to carry-out their preferred refurbishment scheme.
• There has been a significant shift of power from Landlords to Tenants as a result of the Civil Procedure Rules, The Protocol and RICS Guidance Note.
• If the Landlord does not carry out the work they may have to prove their loss by way of a Section 18 (1) valuation, which will provide a cap to the general repairs. Known as the ‘Statutory Cap’.
• In an unfavourable market Landlords generally find it very difficult to let the premises in an unrepaired condition.
• Carrying-out the work proves to the Court that the Landlord has tried to mitigate his loss and where a Tenant is waiting for the premises, maintains a claim for loss of rent/rates. Are there any risks for the Landlord with this strategy?
• The main risk is supercession; as inevitably the Landlord will need to carryout certain improvements, but it’s better
for the Landlord to come-clean with these and honesty here will support the overall recoverability.
• The drafting and management of the repair works needs to be meticulously documented to clearly cross-relate the repairs to the terminal schedule and allow the Tenant’s representative adequate time to inspect concealed or unidentified defects before carrying out.
• Tenant cannot meet cost of works or delays payment requiring legal proceedings to recover monies. This can be mitigated by checking the Tenant’s credit rating and ensuring that the Landlord has adequate funding to cover the cost of the building works.
In summary, Landlords should take expert advice from a dilapidations specialist and give serious consideration to instructing the repair works as soon after lease-end as possible. This strategy will greatly counter the threat of both Statutory and Common
Law caps limiting the claim. Furthermore an open and honest approach towards supercession will clearly demonstrate Landlord’s intentions and be favourably considered in event of Court proceedings being required.
Anthony Lorenz | Dilapidations
