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Now that Article 50 has finally been triggered, consultant solicitor, Tony Houghton, examines the likely impact in the commercial property field.


 

Some tenants may wish to relocate from UK Plc and walk away from their leasehold obligations, either by service of a tenant’s “break” clause on notice or allowing the lease of their shop office warehouse or other commercial space to expire.

Landlords are likely to want to maximise their property income, however, particularly if they feel that there are lean rental years ahead. They will, therefore, be looking to recover as much money as possible from unsuspecting tenants by way of dilapidations demands, whether legitimate or not. Tenants need to anticipate such liabilities (and even make appropriate provision in their trading accounts to meet them where the liability is potentially large) and should ensure that they have the telephone numbers of reputable, experienced building surveyors on speed dial.

Here are a few tips that might help quash or at least diminish such claims from a legal point of view:

Starting Point
Look at the express wording of the tenant’s repairing obligations under your lease and make sure that you have a complete copy to hand before the landlord’s surveyor serves a costed schedule of dilapidations

Standard of Repair
As a matter of law the required refurbishment must be assessed having regard to the age, character and locality of the building for the occupation of any future tenant who would be likely to take it

Dilapidations Protocol
Ask your solicitor or surveyor to provide you with a copy of this – it is intended to provide a level playing field for both tenants and landlords should the matter become contentious

Repairing Covenant
It may be possible that not all the work required to make the premises fit for letting will fall within the tenant’s repairing obligations, particularly if a schedule of condition (however basic or even just photographic) was agreed at the outset of the lease term

Supersession
The landlord cannot recover the costs of carrying out works that will not lead to the premises being any more lettable than if they had not been done. That is, the landlord has not suffered any loss or diminution in the value of its freehold reversion. If the landlord is going to redevelop the property it cannot recover the costs of any works which would be pointless

M&E Services
The tenant need only return the premises in good and tenantable repair with the mechanical and electrical services in satisfactory working order. You do not have to return the premises with new equipment or with a particular life expectancy. This is particularly important as far as air conditioning units and lifts are concerned: they need to be in working order, not brand new.

Keep Calm
As soon as you receive any official looking correspondence from the landlord or its surveyors don’t panic. Remember to seek out the help of a good surveyor to represent you to minimise the pain of the process.

In conclusion, taking action now to help mitigate unexpected invoices or other unplanned expenses will pay dividends. Whilst there is unlikely to be an immediate exodus from the UK within the next two years — and subject to the deal that Mrs May is able to negotiate — the commercial property landscape may be very different from how it is in 2017.

One thing is for sure: now that we are going to be leaving the EU, it may be the case that for some of us the ground under our feet is going to be less ‘firma’ and more ‘terra’.