For many SMEs, the dilapidations bill at the end of a lease is the most expensive surprise of the whole tenancy. The frustrating part is how much of it is avoidable with a little forward planning. Here is how to keep your dilapidations liability under control.
Understand the liability before you sign
The best time to manage dilapidations is before you commit. Read the repairing and reinstatement clauses, and understand exactly what condition you will have to return the space in. If the obligations are onerous, this is a point you may be able to negotiate at the outset. (For the basics, see our guide to dilapidations explained.)
Get a schedule of condition agreed
A schedule of condition is a dated, photographic record of the premises when you move in. Attached to the lease, it can cap your liability so you are not charged for putting right wear and tear that was already there. On an older building, this one document can save you a substantial sum.
Design your fit-out with the exit in mind
Every bespoke alteration you make now is something you may have to remove later. You can reduce future cost by:
- Favouring demountable, reusable partitions over fixed ones.
- Keeping changes to the base building services to a minimum.
- Avoiding unnecessary structural or hard-to-reverse alterations.
- Keeping the existing Category A finish where it already works for you.
Keep your paperwork
Hold on to your licence to alter, drawings, specifications and any correspondence about consents. When the landlord’s surveyor issues a schedule of dilapidations, this paperwork is your evidence for what you are — and are not — responsible for.
Consider a settlement instead of works
You do not always have to carry out the reinstatement physically. If the landlord plans to refurbish or re-let the space differently, a negotiated cash settlement is often cheaper and cleaner than doing works that will simply be undone. The landlord’s surveyor prices a claim; that figure is negotiable, and it is rarely the final number.
Act early — 12 to 18 months out
Leaving dilapidations to the last few months removes your options and your negotiating power. Start reviewing your position 12 to 18 months before lease end, while you still have time to plan works, gather evidence or negotiate a settlement on your terms.
The bottom line
Dilapidations bills are largest when tenants are caught unprepared. Plan from the start, keep good records, design for the exit and seek advice early, and you can turn an unpredictable shock into a manageable, budgeted cost.
Beem Interiors helps London SMEs plan fit-outs and refurbishments that keep dilapidations liabilities in check. Get in touch to review your lease position.
