Terminal dilapidations claim regarding several large lots of industrial space

19 July 2023

X Limited, a large commercial landlord instructed the property litigation team in relation to a terminal dilapidations claim regarding several large lots of industrial space on an estate in Wednesbury. 

The outgoing tenant had been the tenant since 2016 and had repair obligations under the leases which obliged the tenant to give back the premises to the landlord in a state of repair and in good condition. 

Although the outgoing tenant had attempted to undertake some repair works before they left, when they moved out the premises were left in a poor state. 

On expiry of the leases, the landlord instructed a firm of building surveyors to inspect and produce a terminal schedule of dilapidations. That schedule evidenced that the tenant had failed to comply with their lease obligations and estimated that the landlord was going to have to spend £1,327,825.58 to put one of the units in repair and £838,344.24 on the other unit. 

The landlord was also entitled to claim for loss of rent for a period of a year, namely the time that it was going to take the landlord to mobilise contractors and for them to complete the required works.  The landlord’s claims for loss of rent, loss of business rates, insurance premium and service charge, therefore, added up to an additional £1.5m.

The landlord was keen to re-let the premises and therefore instructed contractors to carry out all of the works so that they could achieve a new letting of the property as soon as possible. 

Despite the fact that terminal schedules of dilapidations, and copies of the paid invoices were served on the outgoing tenant and guarantor after the lease had ended, no settlement was achieved and court proceedings therefore had to be issued to recover the financial damages from the outgoing tenant. 

Before the court proceedings were served on the former tenant and the guarantor, a mediation was held with the former tenant and guarantor and their solicitors at which a commercial settlement was agreed. 

The former tenant agreed to pay £1,500,000 within 28 days, in full and final settlement of the claim.  The landlord was delighted with the outcome as it avoided the ongoing costs of court proceedings and put the landlord in the position where it had substantially recovered the amount that it had had to spend on the building in order to put it in the condition that the tenant ought to have done at lease expiry.

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