The article in Property Week’s Professional Comment section (‘Lease-end legacies: why it’s vital to know your liabilities from the start’) raises issues about what provisions tenants should make for rent and service charges beyond lease termination.
While it is important to understand these potential liabilities, they pale into insignificance compared with the potential dilapidations liability a tenant may incur at lease end.
All too often tenants are hit with unexpected dilapidations claims, which they have not been accruing in their financial accounts throughout the tenure of the lease.
Dilapidations are the single largest expenditure a tenant can expect to incur in relation to their property. An annual allowance should be accrued such that when the lease does approach expiry there is not a one-off hit to the profit and loss account that not only contravenes generally accepted accounting practices but can prove to be unaffordable for tenants if they have not been making the appropriate provisions for such charges.
The key, however, is achieving the right balance as regards any potential claim and the amount for which the tenant may actually find themselves liable.
Paul Lande, chief executive officer, Dilaps UK