Lease expiry and dilapidations - don't fall foul
Landlords and tenants approaching the end of a lease face a potential minefield and are advised to tread carefully taking professional advice – that was the message given to delegates at a seminar held on Thursday 18 March 2010 by Kent law firm Gullands and Maidstone chartered surveyor Terry Davis.
The seminar was attended by landlords, tenants and lettings agents across Maidstone and addressed business lease renewals and dilapidations – a subject that all landlords and tenants cannot avoid and one that quite often ends in costly disputes.
A business lease will usually be written for a fixed term, but does not end on the last day of that term unless the tenant has completely vacated. If neither party acts to terminate the lease and the tenant remains the law allows for what is called a Statutory Continuation Tenancy allowing the tenant to remain in the building on the same terms of the existing lease.
Philip Grylls, a partner in the commercial property team at Gullands said: “Occasionally, doing nothing is a good idea and the landlord and the tenant may want to think carefully before they bring the lease to an end. If the tenant is paying a rent above market value it might be in the landlord’s interest to keep things as they are. Likewise, the tenant may be quite happy to continue if it believes it is paying a competitive rent.
“The tenant will however need to keep in mind the uncertainty of having no fixed term tenancy and the threat of being asked to vacate the premises.”
If a tenant decides not to seek a new lease it will receive a schedule of dilapidations, detailing work that is needed to be done to return the building to its pre-lease state to enable the landlord to market or sell the building.
Terry Davis said: “The lease is also likely to state that the building should be returned to its pre-lease state and may be quite prescriptive of what work needs to be done, even to the extent of repainting walls with two coats of good quality paint.
“We would recommend that the tenant think carefully before they act on these notices. Keeping a property in a good state of repair is often a matter of opinion, but decoration or removing certain fittings, such as an installed disabled bathroom, are only needed to prevent any reduction in value.
“If leaving in certain fittings or redecorating with one coat of paint does not result in any loss to the landlord the landlord is unlikely to be able to bring any claim for a breach.”
Philip Grylls concludes: “This is an enormously complex area of law and one where landlords and tenants fall foul. We would always recommend that advice is taken before taking or refraining from any action.”