Shades of Grey – Dilapidations Claims

Ever moved your business, and been faced with a claim by the landlord you’ve left? How much was it for – ten thousand? Thirty thousand? Did you pay it in full? Over the last year, OBI have, we reckon, saved our clients over £3,000,000 in dilapidations claims. We acted on 107 cases – so, as you can see, the average sum saved is a hefty amount.

Why do people get faced with dilapidations claims, and why does it comes as such a surprise? Anybody who is signing a lease on a property should know before they sign that they are taking on a liability. Maybe there’s a mental block, with rent and rates at the front of their mind, rather than costs a few years down the road, but the fact that they’re agreeing to cover the cost of repairs and redecoration upon surrendering their lease seems to be forgotten, in many cases, Dilaps claims should never be a surprise, but often are.

Our advice? A minimum of 12 months from the expiry of a lease, people should have an assessment done of what their liability is likely to be, and it has to play a big part in your decision-making and budgeting from that point on – whether you stay or go, how much you need to set aside to cover the likely bill.

The question here is “is everyone in the property industry geared to doing the best they can for the customer”? In every area of business, there are “hidden costs,” but it’s not unreasonable to say that there are certain landlords only too happy to keep the small print as small as possible. We think these operators are in the minority, but if they’ve got smarter presentation than you, you can get a nasty shock.

An example: we know of a situation where a company leased a large warehouse, and the lease included a clause that they’d have the exterior cleaned when they left. Presumably picturing nothing more onerous than hiring a man with a power-washer to hose down the walls, the occupier thought nothing of it. But this agreement included the roof. With all the health and safety regulations you have to cover now, the scaffolding alone to cover a 500,000 sq ft shed could cost £100,000.

People often think “I use a solicitor, everything’s covered”. That’s not necessarily the case. As long as everything’s legally OK, a solicitor will be happy enough with the document – there’s no guarantee they’ll point out any unusual points in the dilapidations clause. Dilaps claims are rarely a matter of black and white, but shades of grey. The greater experience of them you can bring to bear, the better.

One of the ways OBI can help occupiers is by using our unique position in the market. Because our building consultancy team works so closely with those involved in leasing and asset management, we’re well connected in key markets and tuned into what’s going on. We can put that knowledge to work for you.

For instance, a client leaving an office building may be faced with a claim for repairs and redecoration, to make the office re-lettable. Say, £20,000? But if we’ve heard a whisper that the landlord actually intends to convert the offices to residential, or a hotel, there’s no claim at all.

The average business owner, for all their knowledge in their particular field, doesn’t have that insight into the property market. We do. Speaking to us could save you a lot of heartache, not to mention thousands of pounds.