Dilapidations & Building Surveys

The physical built environment has a fundamental impact on our every working day. When it works it can improve our productivity, lift our spirits and provide the right environment to further our business aims. Get it wrong and it becomes an expense that hampers business and creates a poor image for staff and visitors.

ask-re have a dedicated and experienced team focused on dealing with all the complex and interactive issues that affect the building fabric around us. Over the years we have developed a wide range of services to cover all aspects that can be tailored to our clients individual perspectives and needs.

“I Want to Break Free!”

Ask-re’s favourite candidate for the BLExit leadership role – helping our clients get out of oppressive leasing contracts – is Freddy Mercury look-alike Matthew White, of EC3 Legal www.ec3legal.com – +44 (0) 203 553 4888

Freddy might have wanted to break free but it’s something more and more tenants are finding hard to do. While the tips given in this article to avoid such problems are not a kind of magic, if followed they can help tenants avoid costly mistakes. It is much better to avoid the numerous traps that await tenants, than be the tenant who bites the dust.

The recession in the commercial property world has seen an explosion of disputes relating to the exercise of breaks in leases. This should be no surprise – increasing numbers of tenants downsizing, aiming to cut their rising rent and rates costs by moving to cheaper premises or aiming to re-negotiate the rent on their current premises. In either case they are exercising their break clauses in their leases, break clauses agreed many years ago, often imperfectly understood and often drafted to overly favour the landlord. As always, there are some landlords who want it all and want it now regardless of how unfair it is. And there’s Ask-re, The Tenant’s Champion.

Landlords may be facing higher empty holding costs and slower occupancy rates, accentuated by Reval 17 and the Brexit pause (if it happens of course). It is therefore little surprise that many landlords are seeking to frustrate tenants’ break notices, often on seemingly frivolous or unfair grounds, as well as forcing up rents through rent reviews.

The costs of failing to properly exercise a break can be crippling for a tenant not to mention all the drag and uncertainty arising. They are tied into Premises they do not want with all the associated costs and may well have committed themselves to taking replacement premises. Mistakes by tenants in breaking their lease will more than rock them or even take their breath away. Such mistakes can be a killer queen and destroy a tenant’s business. Ask-re and EC£ can be your best friends…

Here are our top tips for your own Blexit should you be considering getting out.

Tips For Tenants Wishing to Break their Lease

1. Make sure your break clause is properly drafted to begin with! No tenant break should be conditional on anything except giving vacant possession and paying the rent up to date. Absolutely do not accept any other conditions as they enable unscrupulous landlords to trip tenants up later.

2. Check your lease carefully. Well before you need to exercise your break, check your lease carefully and make sure you know what the conditions are to exercise your break. Make sure you diarise any dates (with a substantial safety margin) for steps you need to take to exercise the break. Make sure other people in the organisation are also aware of the dates so the departure of any individual does not leave the organisation as a whole ignorant of the break issues.

3. Ask the Landlord to confirm sums due to break the lease. If your break is conditional on rent and other sums being paid up to date ask the landlord to confirm the accounts due. The landlord is under no obligation to tell the tenant this but if it does it would be stopped from denying the tenant’s break on the basis some other sum of money due has not been paid.

4. Pay an additional sum prior to the Break Date. If your break is conditional on all sums due under the lease being paid up to date, you are at risk of losing the break because some small sum (for instance interest on late rent) has not been paid. The sum involved may be trifling but if there are arrears, however small, the landlord may claim your break is invalid. If you have paid a small additional sum to the landlord before the break date to cover such unforeseen arrears you would be protected from such unscrupulous behaviour. If there are no arrears the Landlord must return the additional payment to you after the lease has determined.

5. Arrange any dilapidation works in good time. If your break is conditional on the premises being yielded up in good repair, make sure you arrange all dilapidations works in plenty of time. If you are going to carry out your dilapidations work yourself rather than agree a settlement with your landlord, make absolutely sure your contractors can finish the job and vacate and clear the premises some days before the break date.

6. Consider an early surrender. If you have concerns regarding the break and your ability to meet any conditions, push to agree an early surrender with the landlord with a payment in lieu of doing the dilapidations work. Often landlords are happy with this since it enables them to re-let the premises earlier and have control over how the premises are decorated. For the tenant, it gives certainty and peace of mind.

7. Make sure you give vacant possession. At the break date, you must give the premises back to the Landlord with vacant possession. You will need to make sure that any undertenant or other occupiers have moved out. Make sure any of your cleaners/ security staff/contractors doing dilapidations work are also out of the premises. Clear the premises of all of your furniture/ rubbish/ files etc. It is surprising how often this does not occur despite being so obvious.

8. Get good advice in plenty of time. Exercising a break in a lease is complex and difficult. Some of the problems are so unfair, the tenant can feel that he is in the world of Radio Ga Ga. Tenants need legal advice well in advance or they risk making a very costly mistake. Andrew and Matthew could be your best friends!