Commercial Lease Ending? Why It Pays to Plan for Dilapidations Early

As a commercial lease approaches its end, landlords and tenants often have several competing priorities. A tenant may be arranging a move, while a landlord may be considering refurbishment or a new letting.

The condition in which the property must be handed back deserves attention well before the final day. Reviewing the position early gives everyone more time to understand the obligations, assess potential costs and make informed decisions.

This guide concerns commercial property in England and Wales.

What are dilapidations?

Dilapidations relate to breaches of lease obligations concerning a property’s condition. Depending on the agreement, they may involve repairs, decoration or reinstatement of alterations.

A schedule of dilapidations identifies the alleged breaches and the works said to be required. A quantified demand explains the landlord’s claimed loss. These documents serve different purposes, and a list of estimated works is not necessarily the same as the sum ultimately recoverable.

The RICS guide to dilapidations explains the main documents and the roles of landlords, tenants and surveyors.

Start with the paperwork

Before deciding what work to undertake, gather the documents that explain the agreement.

These may include the lease, any schedule of condition, licences for alterations, side letters and correspondence about works. Keep inspection reports, maintenance records and photographs available.

Create a simple timeline showing the lease dates, any relevant notices and your intended moving arrangements. This gives your advisers a clearer picture and helps identify matters requiring prompt attention.

Allow time for inspection and planning

A review shortly before handing back the keys can leave little room to investigate defects or organise contractors.

Arrange an inspection with enough time to discuss the findings, obtain advice and compare options. For a larger property, factor in access arrangements, specialist investigations and contractor availability.

If you remain in occupation while work takes place, consider how it will affect staff, customers and business operations. Treat the handover as a project with clear responsibilities rather than a last-minute cleaning exercise.

What should tenants consider?

Ask your surveyor and solicitor to establish which obligations apply before accepting a claim or commissioning extensive works.

An alteration that suited your business may need to be removed, but that depends on the relevant documents and any notice requirements. Do not assume that every improvement must stay or that everything must be stripped out.

Equally, do not assume that completing a selection of repairs settles all outstanding obligations. Record any agreement carefully through your advisers.

What should landlords consider?

Be clear about your plans for the property. Are you seeking another tenant, considering refurbishment or investigating redevelopment?

Your surveyor needs that information when assessing the claim. The Dilapidations Protocol requires the landlord’s intentions to be taken into account and expects claims to be supported by appropriate detail.

It also encourages information exchange and attempts to resolve disputes before proceedings. Read the Dilapidations Protocol.

Take particular care with break clauses

Exercising a break clause is a separate issue from ordinary lease expiry. Ask your solicitor to check the notice provisions, deadlines and conditions early.

Do not assume that moving out or negotiating a repair payment is enough to bring the lease to an end.

Have a commercial lease approaching its end? Contact Winfields Chartered Surveyors to discuss dilapidations advice and a practical plan for your property.