Claims for dilapidations across all faculties of commercial property are seldom more prominent or fraught with contestation than during a periods of economic slow down or difficulty. The key trend of 2023 through 2024 has proven to be both aggressive pursuit and denial, with parties seeking to rely upon any means felt to be available to them to support their cause. This article seeks to consider whether implied 'evidence' might be relied upon in the pursuit or defence of a dilapidations claim.
The Back Story
Premise and direction
Dilapidations claims, initiated via the preparation of a schedule of dilapidations, sometimes referred to as the dilapidations survey, are common law damages claims for breaches of contract. Dilapidations matters are directed by the Ministry of Justice's Pre Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at the Terminal of a Tenancy ('the Dilapidations Protocol'), and encompassed by the Civil Procedure Rules pre litigation protocol. These claims are prepared relative to the repairing covenants as detailed within the applicable lease documents, relative to the condition and configuration of the subject property at the determination of the leasehold interest.
The Approach
Inclination and onus of proof
In the preparation of a schedule of dilapidations or dilapidations survey on behalf of a claimant landlord it is often the case that all information required for the preparation of the same is not available and so a reliance is placed on reasonable assumption. Such lacking information might be an 'as let' floor plan, an objective lease plan, details concerning fixtures, fittings or building services. From a defendant tenant's perspective, reliance might similarly be placed on their alternate such interpretations.
Further examples of documentation that might need to be relied upon include licences to alter and schedules of condition.
The onus or burden of proof in support of a dilapidations claim rests firmly with the claimant landlord, both in relation to the existence of any repairing covenant breach, remedy attendance and, moreover, loss having been suffered. As with all common law damages claims for breach of contract, a claim only exists where a loss is or can be proven.
In those instances where documentary evidence cannot be located, does not exist or is incomplete, whether being approached from the perspective of either of the landlord or tenant, can a claim or any component part of it be substantiated on the basis of implied factors or assumption, reasonable or otherwise?
Claimant landlords readily seek to impose their various interpretations on a defendant tenant as the authoritative view, often bringing about a great deal of concern, perhaps panic, on the recipient tenant's part. The aforementioned factors aside, such further extent to whether a breach does indeed exist, what constitutes disrepair and the remedy that might be required. These subjective views often extend further to licence to alter and schedule of condition contents interpretation, perhaps even an alleged intention of the parties at the outset (at the time the lease particulars were agreed an entered into). Defendant tenants seek to employ a similar approach to their defence of a claim, again, purporting that their interpretation is authoritative.
Whilst a great many factors, associated statute and precedent based laws are applicable to and direct dilapidations claims, can a claim or any component of it be dismissed on the basis of implied factors or assumption, reasonable or otherwise?
The framework that surrounds and directs dilapidations claim formulation and resolution necessitates many reliances upon the subjective determination or associated factors. Although this approach might suggest that implied factors could offer grounds for enforcement or refute or a claim, in the context of associated documentation, the position is presently without clarity, having yet to be tested at law.
This lack of clarity owing to nil legal precedent to date is considered to afford dilapidations claims a disservice, given the imperfect and inherently subjective nature of associated documentation formulation, even when such does exist. Key examples might include 'as let' layout evidence that is not referenced in lease documentation or documentation of extensive disrepair in a schedule of condition that omits to reference a specific location in singularity. Though the parties might assume common sense would prevail, determination by a Court as to the same is yet to offer any assurance.
The onerous nature of commercial property leasehold repairing covenants continue to present significant risks to any tenant entering into them, having not fully grasped the extent of the responsibilities and potential liabilities that might later be bourn in consequence. It remains of critical importance that tenants take timely action to protect their interests, including careful consideration and negotiation of the lease terms, qualification of repairing obligations and liabilities wherever possible and notional consideration of the same for strategic and financial planning purposes.
Node Building Consultancy represent landlord and tenant clients nationwide in various dilapidations capacities. From preparing schedules of dilapidations and carefully procuring works in lieu of such, to notionally assessing likely claims and developing effective, targeted, claim mitigation strategies, we have invaluable specialist expertise and a proven track record of success in this field. Should you require assistance with your dilapidations matters, we would be delighted to hear from you.
Though the parties might assume common sense would prevail, determination by a Court as to the same is yet to offer any assurance.