A common issue in the murky world of dilapidations are lease breaks, which are currently more frequent as tenants look to cut costs. However, a recent legal case has shown this needs careful consideration, as the High Court has interpreted ‘vacant possession’ as being more onerous than previously thought.
The case was Capitol Park Leeds v Global Radio Services and involved the tenant Global Radio Services attempting to reduce its dilapidations costs by appointing a contractor to embark on removing its extensive fit out using the time left before the break date.
The tenant stripped out its fit out in line with the landlord’s claim, along with alterations to services installations. Their expectation was to agree a reduced payment to cover the remaining dilapidations.
However when the break date was reached, negotiations for a final settlement had broken down. The landlord’s solicitors notified the tenant that the break had not been achieved due to a failure to ‘achieve Vacant Possession of the Premises’ and the case ended up in the courts last year.
What was the outcome?
The judge handed down his judgement in October finding that vacant procession had not been achieved, despite the space being unoccupied and the break not being conditional on its state of repair. The problem was that some of the landlord’s fittings and finishes such as radiators, lighting and ceilings had been removed and not reinstated, leaving the property uninhabitable for another tenant.
The judge explained that the word ‘Premises’ is a defined term in the lease, meaning that everything listed as the ‘Premises’ should have been handed back. Unfortunately it was not. This means that the tenant break failed and the lease continues for the tenant for the remaining term of their lease.
This recent court case is an example of how dilapidations need to be handled with care, especially when dealing with tenant breaks, otherwise the implications could be significant and costly. During the last year I have dealt around 20 dilapidation claims from £30,000 for a small retail unit, to over £1.8million for offices in the Charing Cross area, including a major break for a financial association on circa 30,000 sq ft of city office space, where works were carried out focussing solely on achieving vacant procession. In addition I have also been involved in two terminal dilapidations cases which have gone to mediation due to complex legal issues affecting reinstatement liabilities. Our experienced dilapidations advice has been essential to achieve our client’s settlement aims at these mediation days.
About the Author
Richard Douglas, Associate Director in the Project, Building & Consultancy team has over 25 years of experience specialising in dilapidations, due diligence survey work, refurbishment contract work and building consultancy work. To get in touch, please contact Richard.Douglas@colliers.com.