Dilapidations – site inspections and COVID-19
Quite a few of our clients and many surveyors have been asking how to deal with various dilapidations issues against the backdrop of the coronavirus crisis, including: cash flow; inability to conduct on-site inspections; slowing down of court processes etc.
Whilst it is not possible to deal with each and every eventuality, taking swift advice is always a good idea (we are turning queries around quickly at the moment, from the comparative safety of our homes).
One recurring question related to inspection is: whether landlords or tenants are prejudiced, to the extent they may not be able to argue their case convincingly, if they have not been able to undertake an inspection right at or close to lease expiry. Related to that is a concern that if a claim is not taken forward fairly swiftly, by landlords, tenants will be able to argue that the landlord has no intention of doing the works etc.
On the first point: this is really just a matter of being able to provide the best evidence available. If neither side are able to get access for an inspection, then to some extent the playing field could become slightly more of a level one than might otherwise be the case. Whilst the landlord ultimately has the burden of proving the wants of repair/dilapidations, if neither side is able to state definitively what the condition of the premises was at lease end, then it will be a matter of expert judgement, and weighing up the evidence, supplemented by additional evidence whenever an inspection can be undertaken.
Some leases prescribe that inspections and schedules have to be served by particular dates. If that is the case, you really need to take immediate advice to look at what the options are, based on the actual wording of the lease.
On the face of it, landlords will retain a claim for dilapidations after the lease has ended, even if the premises are lying empty and have not yet been inspected. Given that a claim does not “prescribe” (ie. become time-barred) until you are 5 years after the lease end date, there is plenty of time for landlords to take claims forward; and in some cases no harm in having early discussions in commercial terms, notwithstanding the lack of surveyor evidence of condition. There will be tactical considerations for parties when considering whether or not to do this.
At present, at the time of writing, the courts in Scotland are more or less at a complete standstill (for civil matters other than urgent interdicts, and other urgent business). Arbitration, however, continues apace, since most arbitrators are well used to dealing with matters online, and do not perhaps have the same backlogs as are inevitably appearing within the (underfunded) Scottish court system at present. This will change at court of course, but it does seem likely that cases will proceed more slowly given the likely bottleneck when things do get moving again. Again, this may present landlords and tenants with decisions to be made in commercial terms. All of this is said, of course, against a backdrop where, to use the old cliché, “cash is king and queen” coming into sharp focus.
As with many areas of commercial life at present, in dilapidations matters there will be uncertainties and opportunities in the weeks and months ahead. But for those who keep thinking and moving there will be gains to be made.
14th July 2020
We explore the impact of the Code of Practice for commercial property relationships.
15th June 2020
Details of commercial lease obligations, summary diligence and the Corporate Insolvency Bill.
1st April 2020
What do the changes mean for landlords and tenants?