Thursday, November 20th, 2008
Dilapidations claims are one of the most used and abused weapons in the commercial landlord’s armoury. The business tenancy will usually contain covenants by the tenant to return the property in the same good condition in which it was at the beginning of the tenancy but the wording in leases differs in every case and the precise terms of the requirement vary from tenancy to tenancy.
Even the term “dilapidations” can have different meanings according to who the landlord might be. It will usually extend, at least, to removing tenant’s fixtures and fittings, filling the holes in the wall which held up that display case and replacing stained carpet.
Dilapidations became a good means of tacking on a few extra pounds to a business tenancy’s worth at the end of the term. The more unscrupulous landlord served a schedule of dilapidations (the document listing details of the claim for breach of repairing and maintaining terms) for items which were not needed (and frequently not even seriously contemplated as anything on which the landlord would spend some money).
Sadly, for the majority of good landlords, this approach led to a huge distrust on the part of business tenants and the advisors for any dilapidations claim. There were many exaggerated landlord’s claims which typically settled at around half of what was originally claimed. Other problems involved the combative nature of the claim with surveyors and solicitors adopting a ”them and us” stance as well as a disjointed approach to making claims by which the landlord drafted the schedule as a wish list with little thought for the evidence, the terms of the lease or how any item might be proved.
The Civil Procedure Rules came into effect in 1999. They brought with them a number of protocols for different types of claim which carried similar problems. There are protocols for personal injury, medical negligence, professional negligence and even housing disrepair. Unfortunately, dilapidations in tenancies of business premises were not addressed and the problems continued.
Things are changing. The Royal Institute of Chartered Surveyors developed its own protocol in June 2000. It is now in its third edition published on the 12th May 2008 and it is very good. Despite this the Department for Constitutional Affairs has yet to adopt it and bring it in to the Civil Procedure Rules and so its use is largely voluntary. However, most surveyors adopt it as a matter of course and it helps greatly with narrowing issues and achieving agreement on things which ought never to be an issue.
In broad terms, it requires:
After the first four steps, it is unusual for the last two to be needed.
Burt Brill & Cardens was an early adopter of the protocol and we have used it consistently since publication of the first edition.
Wherever possible, we do our best to smooth the way by sending a copy of the schedule by email (or even on a floppy disk or cd-rom) when we act for the landlord or requiring a landlord to do so when we act for the tenant. The tenant can add responses and comments easily, email back the completed schedule and we quickly have an all encompassing document showing all of the issues and points agreed at an early stage. With a good surveyor, often appointed jointly by the parties, we can concentrate on the seriously disputed items.
The result is that the parties only fight about the matters which need fighting and the difference between them is rarely enough to justify huge fees when the parties stop looking at the bottom line and consider the value of the truly disputed items. Costs are reduced and the claim is completed very much more quickly.
Even better, if the protocol is used in good faith and fails to achieve a swift settlement and the matter proceeds to a trial in the County Court, the parties can be sure that they will not be criticised by the Judge for behaving unreasonably. Despite the lack of a formal protocol in the CPR, parties to any dispute are encouraged to follow the protcol and failure to do so can have devastating costs consequences even for a winner.
We will continue to support the adoption of the dilapidations pre-action protocol and hope to see its use made mandatory in all cases soon.
For help with all business tenancy or dilipadations claims contact Steven Kinch or Jonathan Friend
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