Dilapidations Flashcards
What must a surveyor not do when acting in a dilapidations claim?
They should not allow their professional standards to be advances to further their clients case. They should not provide a document that contains items that they know or should know are not true, properly sustainable or reasonably arguable - INTEGRITY
In the absence of a lease, or an express repairing clause how are the obligations dealt with?
Under common law
What are the obligations on a landlord at common law?
- To give full possession at the date of entry - Once tenant is in possession, not to do anything to prevent possession - Warrant that the premises is fit for purpose - Continuing duty to keep premises tenantable, and wind and water tight, once they have been notified of any breaches
What are the obligations on a tenant at common law?
- To take possession at the date of entry - To remain in possession over the course of the lease - To use the premises for the intention they were let - To take reasonable care, and to be liable for damage caused through their negligence - To pay rent
How are common law liabilities transferred under a lease?
Mainly, through the repairing obligation. A form of words requiring the tenant to “keep and maintain in a good and substantial condition”. Additionally, the landlord may remove their warranty that the premises is fit for purpose, or that the tenant accepts that premises as being in a tenantable condition
Why is an understanding on the common law position important, even when there is a lease in place?
If the lease is silent on something, then it will revert back to the common law position. Therefore having an understanding of what the common law liabilities is important to be able to advise a client
What is tacit relocation?
Tacit relocation is where either the landlord or tenant fail to issue adequate notice to quit. In that case, the lease can continue for a year (or less if the lease was less), and all obligations will remain in place
What is a dilapidations claim?
The typical process of the allegation of the breach of an obligation under a lease/tenancy, generally in respect of the repair or use. Normally conveyed via a schedule of dilapidations
What is diminution in value?
Diminution in value is a measure of loss which has no statutory significance in Scotland. It is a valuation of the difference between a value of a premises in its current condition and the premises under the tenancy
What are extraordinary repairs?
Generally defined as extensive or substantial replacement or renewal required as a result of a significant defect caused by the passage of time, natural decay, latent/inherent defects, or an extraordinary event. For a tenant to be liable for extraordinary repairs there needs to be specific terms in the lease (i.e. regardless of the cause of damage)
What is an ordinary repair?
An ordinary repair is a repair considered to be within normal repair and maintenance, to ensure wind and watertight or in appropriate condition for the lease obligations
What is a schedule of dilapidations?
A document that notes the lease, obligations, alleged breaches, wants of repair (non-monetary)/repair works required, and possibly the estimated/actual cost to carry out the works. Usually prepared by a building surveyor, usually provided in Scott Schedule form to allow for tenant responses against specific breaches
What is tenantable condition?
Generally considered to be a condition that takes into account the age, character and locality of the premises and whether it is in a condition where a reasonably minded tenant would be likely to take on a lease of that premises on similar terms
What is the definition of a lease?
A lease is a contract where a landlord provides the tenant with the right to occupation of a premises for a period of time, in return for a payment for consideration (i.e. rent)
What are the common different types of lease?
- Full repairing and insuring (FRI) - Internal repairing only (IRI
What is a full repairing and insuring lease?
Normally involves the transferrance of all repairing obligations onto the tenant for the period of the lease
What is an internal repairing only lease?
Only the repairing obligations for internal fabric of the premises is transferred to the tenant. Often is accompanied by a requirement for pay service charge for common areas
What are the four essential ingredients for a lease in Scotland at common law?
- Two parties - landlord and tenant - Identification of the premises the tenant is to occupy - Obligation of the tenant to pay rent - There is an identifiable expiry (the ish)
What is required for a successful dilapidations claim?
- A lease in place - The part relating to the alleges breach is within the premises (as defined by the lease) - An identifiable breach of obligation which results in a want of repair that causes (or is likely to) the other party to suffer loss
Why might a landlord serve a schedule of dilapidations?
- To remind a tenant of their obligations/require a repair during the currency of the lease - To define work that is required to be carried out prior to lease expiry - To define breaches to substantiate the wants of repair and pursue a claim for damages for works the tenant has failed to carry out
Once instructed to act in a dilapidations claim, what documentation would you expect to review?
- Lease - understand the premises and the obligations contained within it - Assignations of lease - Minutes of variation/extension of lease - License to alter (plus plans/spec) - Schedule of conditions (appended or referenced) - Schedules of LL’s fixtures and fittings - Any planning notices attached to premises - Plans - defining premises and layout at commencement
What clauses in the lease would you expect to take particular consideration of while acting as part of a dilapidations claim?
- Premises (definitions of extent, lease plan) - Repair - Decoration - Alterations/reinstatement - Yielding up - Statutory obligations - Recovery of fees
What remedies are available to a landlord?
- Decree of specific implement (during lease only) - Instigate repair works (only if lease allows, balance of peaceful possession to be considered) - Terminate lease (by invoking an irritancy clause, legal advice required) - Claim for damages (lease expiry, should be a measure of loss suffered)
Grove Investments v Cape Building - lessons learned?
Payments clauses - if based on VALUE, then measures of loss other than may be considered, included Diminution in Value
@SIPP Pensionvs v Insight Travel - lessons learned?
Payment clauses - depending on lease drafting, a payment clause may hold up even if the Landlord has no intention to carry out the works
Define the term ‘dilapidations’
‘The term ‘dilapidations’ refers to a state of disrepair in a property where there is a legal liability for the condition of disrepair’ Those items of disrepair that arise through breach of contract, especially by one of the parties to a lease, giving rise to a right to damages or remedial action
What are the 3 factors for dilapidations?
• A lease (usually a commercial lease of 25 years or less but may be a longer term); • A piece of property or part of an estate (e.g. offices, a warehouse, or a unit in a shopping centre) • A state of disrepair for which one party has accepted legal liability and for which the other party has suffered or will suffer financial loss’
Why does a dialpidations claim benefit the owner of the property?
If a building is not properly maintained, it can become damaged or fail, with the effect that the value and usefulness of the building might be diminished, either to its owner or to those occupying it
What is in both of the parties interests in terms of responsibility for the leased property?
• When a building is let, the landlord and tenant will be keen to ensure that one or both of them take on the responsibility to maintain the property. • identifying what the landlord or tenant may or may not do to the premises is decided upon in the lease
What is a dilapidations claim?
A dilapidations claim is an assessment of whether these provisions have been complied with and the implications of this If a building has been damaged, and assuming that action is required, then the first task will be to seek to determine what the breaches are, generally by recording them in a Schedule of Dilapidations
How does the length of the lease affect the remedial actions?
•The remedies that are available will be influenced principally by the length of the term of the lease that is remaining •However, when these remedies are to be imposed on the other side, especially where this takes the form of financial compensation, the actual losses that these breaches cause need to be taken into account
What two factors must be considered when covering the dilapidation task?
• The extent of the breaches of the lease, together with the works necessary to correct them •The actual effect that these have on the other’s interest
What does fitting out mean?
Works required by a tenant to make the premises fit and ready for occupation and use
What does forfeiture mean?
The ability of the Landlord to bring the Lease to an end during the Term as a result of the Tenant not having paid rent, not having complied with covenants or becoming insolvent
What is a full repairing lease?
A full repair and insuring lease means that a tenant is responsible for all maintenance (internal and external) as well as the buildings insurance. Also known as FRI or full repair
What is an internal repair only lease?
An internal repair only lease means that a tenant is responsible for internal maintenance only. The Landlord is likely to be responsible for external maintenance
What is a licence?
A document by which the Landlord gives consent usually to alterations to the premises or the assignments or underlettings
What is a rent review?
The basis on which the rent can be increased during the Term. Rent Reviews often take place every 3 or 5 years. The Lease will set out how the rent is to be reviewed
What is a service charge?
The amount that the Tenant has to pay to the Landlord for maintaining and repairing common parts of the property or building such as repairing structural parts with an Internal Repairing Only Lease or areas of a building or estate that are used in common with other Tenants
What is an assignment?
The transfer of the Tenant’s interest in the Lease to another person (the Assignee)
What is a break clause?
A clause within a lease allowing the landlord or tenant (or both) to terminate the lease upon serving Notice as defined in the lease
What are covenants?
The obligations that the Landlord and the Tenant must comply with. These are set out within the Lease itself. The Tenants Covenants are one of the main parts of the Lease
What is demise?
The area that is let to the Tenant under the terms of the Lease
What is a term?
The length of time that the Lease is granted to the Tenant for
What is underletting?
The granting of an additional Lease by a Tenant to a third party to another person (the Under tenant) of all or part of the premises with the existing lease staying in place