Dilapidations Clauses in Commercial Leases in the UK

Are you seeking to lease business premises? In that case, you may have come across the term dilapidations or be wondering about the extent of your responsibility to keep a commercial property in good repair. Or perhaps you are seeking to limit a potential claim from your landlord concerning the condition of the leasehold property. This article will explain what dilapidations clauses are and your responsibility to make good any damage or disrepair in the premises you lease.

What Do Dilapidations Mean?

Dilapidations refer to any damage you have caused to the business premises you lease. It also includes damage to belongings or fixtures of your landlord that you have allowed to fall into disrepair. 

The dilapidations clause is a term in your commercial lease which requires you to repair or ‘make good’ any damage you have caused. Your lease will likely contain dilapidations clauses. This is because your landlord will want to make sure that you will look after their property.

As well as repairing any damages, suppose you have carried out extensive alterations to a property. In that case, you may also be required to return the property to how it was when you took on the lease. Likewise, you will also usually be required to keep the property in a good state of decoration.

Further, your lease will usually contain dilapidations clauses requiring you to ensure the property complies with all relevant legal obligations. For example, you may need to ensure your property complies with regulations relating to health and safety.

What if I Do Not Carry Out Repairs?

If you do not carry out repairs required of you during the term of your lease, this may put you in breach of the terms of your lease. Consequently, your landlord can then make a dilapidations claim against you.

If you fail to make repairs at the end of your lease, the landlord will usually arrange a third party to complete the work. Likewise, they will charge you the costs. While this may seem like an attractive option, you have no control over who does the repairs or its costs. In addition, your landlord could seek compensation from you for the period they have not been able to rent out the property. Therefore, it is better to carry out the work yourself and pay for it. This ensures there are no surprises and you are not at risk of a legal claim from your landlord.

Budgeting for Dilapidations

If you and your landlord come to a favourable agreement as to your obligations concerning dilapidations, it is still a good idea to budget for costs for potential repairs. Having money set aside for repair works can be extremely useful. It helps ensure you can keep the property in good repair during and at the end of your lease. 

How much you will need to set aside will depend on various factors, including:

• age and type of the property you are renting; 
• the length of your lease; and 
• any alterations you have made.

Schedule of Condition

Additionally, suppose you are planning to lease commercial premises which are not in great condition to begin with. In that case, try to limit your obligations to repair or make good damage or disrepair. You can do this by requesting a Schedule of Condition. This document works like an inventory with a residential property. It lists the state of the premises and any fixtures or fittings the landlord is providing. 

Indeed, having a Schedule of Condition will effectively mean that you are only required to keep the commercial premises in as good condition as they currently are.

Repairs During and at the End of Your Lease Term

Your landlord can serve a Schedule of Dilapidations on you during your lease term or in readiness for your leases end. The Schedule of Dilapidations lists all items that your landlord believes need repairing, maintaining or redecorating in line with your obligations under the commercial lease. Likewise, you will be required to make the appropriate repairs. 

If you do not make the necessary repairs, your landlord could seek to end your lease for breach of your lease terms. Alternatively, your lease may allow them to carry out the repairs themselves and then recover the cost of repair works from you.

It is also a good idea to think about what repairs, redecorations and maintenance you will need to carry out. Indeed, you should identify these long before your lease ends. That way, you can minimise any potential dilapidations claims from your landlord.  

Key Takeaways

Dilapidations clauses are common in commercial leases. They require you to make good any damage you cause your landlord’s property and keep their property in good repair and decoration generally. You must also ensure that you comply with all applicable regulations, such as those relating to health and safety. Notably, a landlord can make a dilapidations claim for a tenant’s failure to keep the commercial property in good condition.

Whilst you are unlikely to negotiate the removal of such clauses, you can limit your responsibilities by requesting a Schedule of Condition of the premises. This document will form a record of the state of the premises when you rent them. Likewise, it means that you are not required to maintain the premises in any better condition than they were at that time.  

If you need help limiting your responsibilities for dilapidations in a commercial lease, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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