Nowadays, companies prefer shorter leases and often change building location more frequently which can end up being a very expensive business. Jonathan Grimes, Principal Surveyor at DHP, explains why thinking ‘end’ at the ‘beginning’ can save you money
Dilapidation charges arise from contractual obligations to restore or reinstate a building to the condition it was in on commencement of a tenancy. If a systematic approach is adopted by Facilities Managers (FMs) early on, the impact of dilapidation charges can be minimised.
FMs should always consult landlords about planned changes to the fabric of a building or critical building systems at the earliest opportunity. Failing to do so at the beginning can provde costly at the end. FMs should exercise caution when alterations to the general layout of an office call for the reconfiguration of critical heating, ventilation and air conditioning or lighting systems. At the end of a lease, landlords who offer high-quality office space will often insist on converting back to the original system configurations believing them to offer the best blank canvas for attracting new tenants.
FMs who think their company is likely to incur significant dilapidation charges might lessen any potential financial impact by establishing a sinking fund to smooth cash-flow when sufficient unexpired time remains on a lease. Alternatively, planning for necessary work to be undertaken over a period of months or years to avoid an unexpectedly large bill on exiting a building would be advisable.
Taking good care of a building from day one is paramount. The impression a building makes to the surveyor appointed by a landlord to carry out an inspection for dilapidation purposes is important. For example, a poor perception of cleanliness can prompt the surveyor to delve deeper into the buildings state of maintenance and result in protracted negotiations or legal action. It is equally important to have valid test certificates and required building documentation at hand to facilitate a smooth inspection process.