Do you Understand your Lease and its Implications?
If you run a business in the current economic climate, you’ll know that dealing with cash flow and staffingwhilst trying to secure a profit can be challenging. In these circumstances maintaining and repairing your business premises will often be low on your list of priorities.
You are probably already aware that when it’s time to vacate the premises you’ll have a responsibility to carry out repairs and redecorate, but do you understand the extent to which these works should be carried out?
Most commercial leases have clauses allowing the Landlord’s nominated Building Surveyor to inspect and prepare a “Terminal Schedule of Dilapidations” near the end of the lease. Depending on the terms, this schedule could includefor reinstatement, repair and redecoration.
The landlord will normally serve the schedule prior to lease expiry, ideally looking for the repair, reinstatement and redecoration works to be completed before you vacate the premises. This is not the ideal situation, therefore a flexible Landlord may agree to negotiate a sum of money known as a financial settlement to cover the costs of employing contractors and their surveyors to carry out and oversee the necessary works. This situation would absolve you of having to carry out any works yourself.
To minimise pressure at the end ofa lease employ your own Building Surveyor to consider your lease terms in relation to the demands made by the Landlord. Your surveyor can respond to the schedule on your behalf, with the benefit of a full understanding of the process.
Pro-active management can reduce costs over time and placate your Landlord long term. Consider the potential issues and set in place planned maintenance procedures that cover your responsibilities. Active maintenance reduces the probability of disrepair, and will subsequently reduce your liabilities when you decide to leave the premises.
If your strategy currently revolves around your “core” business, you should consider taking advice from an experienced Building Surveyor on how to manage your lease obligations now. The cost of a dilapidations claim may affect any business strategy if not assessed and factored in at an early stage. A tenant that plans growth into new and improved premises may well find themselves restricted by the liabilities of the old premises.
For those signing a new lease it may be worthwhile consideringhow to limityour repairingliability by annexing a “Schedule of Condition” to your lease. If the property is not in pristine condition it would be advantageous to itemise all the defectswithin the Schedule of Condition. This has the effect of reducing your long term liability.
One thing is for certain: tenants who ignore their repairing and decorating obligations do so at a detriment to their finances. You must be aware of these obligationsand how they affect your business.
For more information on dilapidations contact Andrew Cliff on 0113 243 6777 or at andrew.cliff@ryden.co.uk
