Overview

It is worth remembering that when you vacate a leasehold property, your liabilities do not necessarily end there. It is likely that your lease will require you to meet certain repairing, decoration, statutory and re-instatement obligations before you leave. It is therefore essential that you know what these requirements are well beforehand because rectifying them once you have left will be far more costly than dealing them in advance.

The Process

We recommend that between twelve to eighteen months before you plan to vacate your premises you instruct a surveyor to prepare an ‘Assessment of Liability Report’. This will detail the cost of meeting all your lease obligations by the time your lease comes to an end.

This assessment involves the following:

  • Reviewing your Lease, Licences for Alterations, Schedule of Condition and Floorplans
  • Undertaking a survey of your demise to determine the extent of any liabilities given the current condition and the provisions of the lease
  • Preparing budget costings for any works

The report is usually provided in electronic format and should include a summary of key leases clauses, estimated budgets and a recommended strategy for meeting your lease obligations.

Strategy

In some cases we recommend that an informal approach is made to the landlord to discuss a cash settlement in leiu of full scale re-instatement. In other cases, the landlord may have already initiated formal proceedings by issuing a Terminal Schedule.

If there is a suspicion that the landlord will substantially refurbish or even redevelop the property at the end of the lease, the strategy may be quite different. In these circumstances, it is possible that the tenant will not be liable for any re-instatement or dilapidations. This outcome relies on a principle set out in Section 18 of the Landlord & Tenant Act 1927.

Assuming Section 18 has no relevance and the landlord is unwilling to agree a negotiated settlement, it may be necessary to undertake the re-instatement and dilapidations works before the expiry of the lease. As a result, the timing of your relocation could be affected quite significantly if the scale and complexity of the works.

A word of warning 

Please note that if the works are not completed before your lease expiry date you could be liable for consequential losses (e.g.’s empty property rates, lost rent, non-recoverable service charges etc) as well as the costs that the landlord will charge for completing the works himself. Please also note that neither you nor your contractor will have the right to enter the premises beyond your lease expiry date to complete the works. Needless to say, this situation is best avoided.