Legal & Reg Flashcards
LV 3 -Why was the Lease complicated at Burlington House?
- GSL has occupied some 13,900 sq. ft of the east wing of the New Burlington House complex since 1874 (i.e. 149 years).
- However, the formal Lease that details your potential liability has only been in existence since 1st February 2015.
- In essence we are looking at your 150-year occupation through the lens of only a 10-year liability.
- This means that any fit-outs, alterations and modifications that have been undertaken prior to this date should not fall under your liability.
LV 3 -Options and Strategy Nr 1
Do nothing and await the Landlord’s formal service of a Schedule of Dilapidations once you have vacated.
Pros – you know the quantum of your liability.
Cons – your only option is to negotiate a financial settlement.
You are unable to undertake the repair works as you are no longer in occupation.
You would potentially be liable for other Heads of Claim that the Landlord would apportion to you, such as loss of rent & service charge whilst the works are being undertaken.
Please note that dilapidations law does not oblige a landlord to commence dilapidations discussions prior to expiration of a lease term.
LV 3 -Options and Strategy Nr 2
Undertake works that you believe you are liable for whilst you are in occupation.
Pros – you are in control of what works are undertaken.
You are able to seek competitive quotations;
You limit the other Heads of Claim that the Landlord would otherwise apportion to you such as loss of rent whilst the works are being undertaken.
Cons – You are second-guessing what the Landlords sees as your liability.
You may have been able to negotiate a settlement figure that was less than the cost of doing the works.
You would incur management time to project manage the works.
LV 3 -Options and Strategy Nr 3
Start early discussions with the Landlord regarding your potential exit.
Pros – by involving the Landlord you will gauge what their future intentions are for the building and if this is a total refurbishment then some of the repair works that you are liable for could be negated by the rule of supersession
You are not having to second-guess what the landlords see your liabilities as being as the works are undertaken with the landlords agreement.
Ability to procure some of the recommended works before the end of the term and negotiate settlement of a residual claim for the works not undertaken if a claim is subsequently received.
Cons – Prior to commencing these discussions we would suggest that some prior works are undertaken e.g. fixed electrical testing, etc so that GSL comes across as a reliable and competent tenant that can be trusted.
What is Supersession?
The landlord cannot claim to repair something that they knowingly will be removing in the near future.
These claims are intended to allow the landlord to recover their losses as a result of dilapidations, but they cannot profit from them. So if for example the landlord does not intent to reinstate the property, perhaps if the property is to be demolished or refurbished, this must be taken into account, that is, works that might otherwise have been claimed for have been superseded and are removed from the claim.
LV 3 -Options available for Managing Liability
1) Occupation since 1874 HOWEVER the formal lease detailing liability has only been in existence since 2015- This means that any fit-outs, alterations and modifications that have been undertaken prior to this date should not fall under your liability.
2) The GSL’s Landlord is the Ministry of Housing, Communities and Local Government. It remains to be seen whether the Landlord will be less ‘aggressive’ with you on any negotiations with you, compared to how a commercial sector landlord would act.
3) The property is Grade II* listed and within the Mayfair Conservation area – this means that any works must be undertaken whilst being mindful of any required Listed Building Consents and approvals.
What is a Dilapidations claim?
The overall process associated with an allegation of a breach of lease/tenancy in relation to the condition and/or use of the property, typically as identified in a Schedule of Dilapidations, Quantified Demand and/or Diminution Valuation.
What is Diminution Valuation?
A valuation prepared in order to calculate the diminution in value of a landlord’s property Incurred as a result of alleged breaches. The document is usually prepared by a specialist valuation surveyor.#
Diminution in Value refers to the loss of value, if any, in the property that was leased due to the dilapidations. According to legislation, a landlord’s damages, or compensation, for dilapidations is capped at the lower of the Cost of the Remedial Works, or the Diminution in Value.
What is a Schedule of Dilapidations?
a document that identifies:
* relevant lease/tenancy obligations
* alleged breaches of those obligations
* in certain circumstances remedial works that have
been completed or are proposed in order to rectify
each alleged breach and
* potentially the estimated or actual cost incurred in
rectifying those breaches.
What are the types of Landlords Schedule of Dilapidations?
Interim Schedule of Dilapidations: a Schedule of Dilapidations prepared in contemplation of remedy of any alleged breaches during the contractual term of the lease, and not relating to yield-up obligations.
Terminal Schedule of Dilapidations: a Schedule of Dilapidations prepared at or shortly after the end of the lease term. This phrase is also commonly used in relation to a Schedule of Dilapidations prepared in anticipation of the end of the lease term, which includes reference to yield-up obligations.
What is a Scott Schedule?
Scott Schedule: a Schedule of Dilapidations with additional columns to enable the parties to set out their respective views. The document is usually prepared by a building surveyor.
RICS Guidance Note for Dilapidations?
Dilapidations in England and Wales, 2016
What are the different types of Listed Buildings?
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What is the importance of GSL being Grade 2*?
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What are approved documents?
The ‘building regulations’ established standards that had to be achieved in the construction of buildings.
The ‘approved documents’ provide guidance for how the building regulations can be satisfied in common building situations.