How can we minimise the dilapidations we have to pay out for our stores when leases come to an end?
The key is to think about dilapidations all along the property leasing process, not just before a lease is due to come to an end.
Tony Lorenz is director at surveying business Dilaps UK. Even on a small store, a landlord could claim dilapidations of £40,000 to £50,000 at the end of a lease, he says, with the expectation of a settlement of about £20,000 to £25,000.
Dilaps UK recommends carrying out a detailed assessment of a property’s condition at the start of the lease, as buildings do not have to be in better condition at the end of a lease than they are at the start.
And if you apply to the landlord to make alterations during the lease, Lorenz suggests proposing that no reinstatement is required as you are improving the property.
A professional assessment of dilapidations during a lease also allows retailers to limit their tax liabilities, as it can “allow them to make a provision in their books for future expenditure”.
At the end of the lease, a landlord will serve a schedule of dilapidations. However, the tenant’s liability is capped at the difference between the value of the property’s freehold if the works had or had not been carried out.
Where there is a sum to be paid, Lorenz believes that there are ways to get a discount. “The landlord usually wants a cheque, therefore a settlement should be discounted for cash as opposed to carrying out the works,” he says.