News

Dilapidations - Looks Matter

Dilapidations - Looks Matter

Blue Manchester Limited v North West Ground Rents Limited [2019] EWHC 142 (TCC) was listed by the Estates Gazette as one of the Top 10 cases of 2019.
The case involved a claim by a long-leasehold tenant of a hotel, seeking specific performance against the hotel’s freeholder, ordering it to comply with its repairing obligations under the lease. The case is noteworthy in that not only did it involve an order for specific performance, but it also clarified new issues of law.


Top Ten Dilapidations Facts

Top Ten Dilapidations Facts

1. Schedule of Dilapidations – What is it?

A schedule of dilapidations records the works required to be done to a property in order that it is put into the physical state the property should have been put in if the tenant had complied with its covenants or obligations contained within the lease of the property.

Landlords - need to be sure that they get the best advice and practice to avoid drawn out expensive settlements.


IFRS 16 is now operational and may reduce future lease lengths

IFRS 16 is now operational and may reduce future lease lengths

Summary

From 1 January 2019 new “International Financial Reporting Standard (IFRS) 16 Leases” makes significant changes to lease accounting for affected tenants who are now required to report lease liabilities on their balance sheets. This is likely to influence the length of leases taken by tenants in future and will impact tenants’ earnings and liabilities with consequential effect on covenant tests.


Why obtaining early dilapidations advice could be crucial, particularly when exercising a break.

Why obtaining early dilapidations advice could be crucial, particularly when exercising a break.

Office Depot International (UK) Limited v UBS Asset Management (UK) Limited & others [2018] EWHC 1494 (TCC)

This decision may close down one of the potential options available to tenants who are unsure of their lease ‘dilapidations’ obligations and want clarity before committing to a programme of remedial works.
The tenant of a large warehouse in Manchester brought a claim against its landlord for a declaration as to whether any works were required to put the roof into repair and if so, what those works were.


Break notices: give me a break?

Break notices: give me a break?

Goldman Sachs International v Procession House Trustee 1 Limited [2018]

Summary

A tenant's break option was conditional on compliance with the requirement to yield up the premises with vacant possession on the break date. However, the High Court has ruled that this condition did not extend to requiring full compliance with the tenant's obligation to reinstate.


Where is the Schedule of Condition?

Where is the Schedule of Condition?

In Dem-Master Demolition Ltd v Healthcare environmental services Ltd [2017] CSOH 14 the Outer House of the Court of Session considered the interpretation of the repairing clause in a commercial lease which referred to a photographic schedule of condition. The schedule of condition had never been prepared.

In its absence, what repairing standard would apply at the termination of the lease?


How a Lease Can End

How a Lease Can End

There are various ways in which a lease can end. The appropriate method of termination depends on several factors including whether the lease has the protection of the Landlord and Tenant Act 1954, which party wants to bring it to an end, whether the lease is coming to its contractual end or one party wants to get out of it early, and whether the tenant is in breach of any of the lease terms. This note provides an overview of the most common ways in which a lease may end and highlights some of the key considerations.

Business Tenancies – Landlord and Tenant Act 1954 (the “Act”)

The Act offers protection to business tenants when the contractual term of a lease is ending, though the landlord and tenant may contract out of the Act if they wish. This protection gives the tenant a right to remain in occupation of the property and to take a new lease at a market rent. Unless the parties have contracted out before the lease is granted, a protected lease will automatically continue after the contractual termination date. If either party wishes to bring the lease to an end they need to follow a specific procedure.


Landlords’ dilapidations recovery may be limited to the cost of work they actually carry out

Landlords’ dilapidations recovery may be limited to the cost of work they actually carry out

Car Giant Ltd and another v Mayor and Burgesses of the London Borough of Hammersmith [2017] EWHC 197 (TCC)

Background

Hammersmith Borough Council’s lease included a covenant to yield up the property in good and substantial repair.

Car Giant together with others was the Council’s landlord. The landlords brought a claim for dilapidations at the end of the lease which exceeded the cost of the works that they, the landlords, had undertaken. They had carried out some repair work, however, much of the work referred to in the schedule of dilapidations had not been done.


Is a dilapidations settlement capital or income

Is a dilapidations settlement capital or income

In James Allan Thornton v HMRC [2016], the First-tier Tribunal (FTT) considered the distinction between income and capital payments in relation to a dilapidations settlement and held that a payment to a landlord as compensation for dilapidations was a capital receipt.

Background

James Allan Thornton owned 18 flats, known as Jordan House, Nairn (the property). The property had been the subject of a single lease.


Dilapidations in England and Wales, Guidance Note 7th Edition

Dilapidations in England and Wales, Guidance Note 7th Edition

The dilapidations guidance Note 7th Edition has now been published by RICs and is available for downloading on our website

This guidance note seeks to advise members on the factors they should take into consideration when producing Schedules of Dilapidations, Quantified Demands, Responses, Scott Schedules and Diminution Valuations for reference to or use by the client, the other party to the lease, third parties and tribunals.