Assigning a Pub/Commercial Lease and the Pitfalls, Part 2
With the advent of the Pub Co’s and tied leases, a new problem entered the industry on a large scale, previously Brewers had short term tenancies with limited responsibilities and the tenant was not responsible for repairs and structural faults, only painting and decorating, the rent was set at the length of the tenancy or reasonable terms.
The tenant and family lived on the premises and knew that their commitment was for a limited period without onerous responsibilities that went with a present day tied lease.
With commercial leases the majority of lessees are responsible for all structural repairs and any faults that appear during the term of the lease, unless the fault had been identified during the initial survey.
Dilapidations are the real sting in the tail, unscrupulous Landlords always try to exploit the dilapidations claim, it normally includes the landlords admin fee in addition to the actual cost of the dilapidations, which can be a percentage of the repairs.
All improvements made may have to be removed if not agreed in detail with the landlord, we took a new factory with an inadequate electricity supply, we upgraded it with permission and the proviso that if the factory was assigned that it all had to be removed and put back to it’s original state.
The obvious thing to do is ensure that your original surveyor tells you what needs doing and get your own builder to carry out repairs before the landlord or his surveyor get involved, when assigning negotiations are approaching completion.
I had a call some years ago from a lessee who was about to assign the lease, a customer was sitting quietly on the other side of a partition in the bar and heard the Area Manager and Surveyor talking.
The Area Manager said that there was a £10K deposit which they did not want to give back, would the Surveyor ensure that the dilapidations bill was in excess of £10K, which is easy enough to achieve in an old pub.
I phoned the Regional MD of the company, who I had met on several occasions, and told him that the lessee had an independent witness to this conversation with names, he denied such activities were used in dilapidations and duly ensured the lady had her deposit back.
I had two more similar dilapidations both with lady lessees, both properties were in excellent condition, far better than when the lease started, a couple of phone calls and the dilapidations were dropped, not the same company.
The leases were assigned with no dilapidations, any work that needed doing had been done by the lessees builders.
One lessee had a letter saying the deposit would be paid in 28 days, nothing appeared, I checked with my colleague who is a Commercial Lawyer.
He said that the company were not obliged to comply with the 28 days, it took two months to get the money and several phone calls and an article under “Barrel-Dregs”, the deposit as far as the Pub Co was concerned is better in their account than in a departing lessees account.
The law changed a few years ago, if a landlord does not spend the whole of the dilapidations bill claimed, if the landlord does not spend any of it, it is refundable to the lessee.
If the property is scheduled for a total refurbishment/reconstruction/change of use, they cannot claim dilapidations, see the connecting links for an accurate description of what a landlord can or cannot do.
These Links are worth reading and understanding, before the landlord produces a dilapidations bill.
Dilaps 1 Scottish Lawyer
Dilaps 2 London
Dilaps 3 UK
Dilaps 4 Barrel-Dregs
Authorised Guarantee Agreement (AGA) LINK
Other Issues LINK