IN THE large majority of leased premises, the repairing obligation will rest firmly with the tenant. However, in these tougher economic times, can the landlord be guaranteed that the tenant will be there at the end of the lease to fulfil those obligations?

Almost all commercial leases have provision for the landlord to undertake interim dilapidations inspections to ensure that the tenant implements necessary repairs to comply with their lease.

This provision is included to protect the landlord’s asset throughout the term of the lease, and not only at termination prior to the property being handed back.

Landlords can often take a relaxed approach to dilapidations during the course of the lease, and in effect trust the tenant to maintain their property in good condition without actively checking for themselves.

Furthermore, property maintenance (particularly in leased premises) often drops off the radar during times of recession, which clearly increases the potential exposure for the landlord.

Dilapidation liabilities typically run at 10-15% of the asset value of the property, but can sometimes extend as far as 20-25% of the value of the property, if the property has been neglected. When this liability is added to the fact that there is no longer any rental stream void period while the repairs and maintenance are carried out, and professional fees for arranging all of the works, it is easy to see how a landlord could be staring down the barrel of a 20-30% erosion in the value of their property, should the worst happen.

Similarly, where a landlord retains part of the responsibility to maintain the property and recoup expenditure via a service charge arrangement, costs can generally only be recouped once the work has been completed.

Our advice in these situations is for landlords to be more pro-active than ever to ensure the property is fully maintained and minimise the risk of being left with a service charge liability and no tenant to allocate it to.

In almost every case, the cost of instructing a building surveyor to inspect a property on behalf of the landlord will be rechargeable to the tenant under the terms of the lease.