Commercial Lease Dilapidations – even high street retailers aren’t exempt!
The Covid-19 pandemic has caused disruption on a national scale. We have however seen an increasing number of commercial landlords and tenants working together in order to try and accommodate each other's needs to make it through the pandemic, whilst balancing commerciality during these uncertain times. In our experience, this largely appears to be working effectively which will hopefully allow the parties to continue having a good long-standing relationship once the world emerges from the restrictions imposed during this pandemic. However, like all good rules there appears to be an exception. Here our Commercial Litigation Solicitor, Lauren Smith, gives an account of her current experience in dealing with a dilapidations dispute involving a well-known high street retailer.
It is commonplace that when a commercial tenant serves notice and vacates a commercial property terminating its lease with its landlord that the issue of dilapidations will shortly follow, and this case was no exception. Upon receipt of the tenant's notice to terminate the lease my client had an interim schedule of dilapidations prepared by a suitably qualified surveyor. Disclosure of this schedule was provided to the tenant in the hope that some, if not all, of the items contained within it could be adequately addressed in advance of the lease coming to an end. Had the tenant completed such works my story would end there.
Whilst the well known high street retailer acknowledged receipt of this schedule it failed to take substantive action in respect of it before the lease came to an end suggesting that finding the time to visit the premises to carry out an inspection was the issue. Once the tenant had vacated the premises and terminated the lease in late 2020 a further updated terminal schedule of dilapidations was prepared on behalf of my client and again provided to the former tenant in accordance with the relevant Pre-Action Protocol. Aside from merely acknowledging receipt of the updated schedule from both myself and my client's surveyor the former tenant failed to address the issue of dilapidations.
The former tenant was given "essential retailer" status enabling it to continue trading throughout the pandemic and my client therefore finds it difficult to accept that the lack of action was due to a cash flow issue.
I cannot speculate as to why this retail giant is simply failing to adhere to its contractual obligations in respect of dilapidations, or even disputing them. I am however assisting my client in taking the necessary steps as required by the relevant Pre-Action Protocol with a view to issuing legal proceedings for damages against the former tenant, along with further sums in respect of the costs incurred to date by my client and any interest on such sums he may be entitled to.
Commercial landlords and tenants should wherever possible try and reach an amicable agreement in respect of any dilapidations claims. Whether parties are able to reach an agreement or not they should ensure that they comply with the relevant Pre-Action Protocol at all times, from the outset which will help establish if there are any further opportunities of settlement later down the line, but perhaps more importantly help avoid detrimental costs sanctions being made against them.
If you are a commercial landlord or tenant and have any queries regarding dilapidations, or commercial leases in general please contact Lauren Smith on 01922 707048 or at our Sutton Office on 0121 355 2336.