Do Tenants have room to improve

Article courtesy of the Irish Times 29th April 2016.

Do tenants have room to improve?

Q I am a tenant of a commercial property and I am coming to the end of my lease. The landlord is seeking a significant claim to the fact that I made minor alterations internally in terms of adding two additional partitioned rooms. In my opinion this had added value to the property and should not attract a penalty. I received verbal permission for the works two years ago from the landlord. Where do I stand in relation to this?

AThis issue is to do with “dilapidations”, which is in effect the works that a tenant has to do in order to comply with the repairing and yielding-up obligations under the terms of the lease. The lease is the key document and should set down your repairing responsibilities. However, even at this, it can be quite difficult to interpret your repairing obligations and it is probably fair to say that there are two opposing views between landlords and tenants. Typically a landlord believes or understands that the tenant is responsible for major repairs and improvements and expects the building to be returned as good as new. On the other hand, typically a tenant believes that the only obligation is to give the premises a “lick of paint”. More often than not, the answer lies somewhere in between these two extremes, and should in fact be contained within the lease; these can normally be properly interpreted by chartered building surveyors who practice in the area of dilapidations.

Take the example that you have raised regarding the installation of partitions. Clearly, this is a huge improvement from your perspective in that you now have self-contained offices/meeting rooms etc which allow you to make better use of the premises. However, from the landlord’s perspective, the partitions are unique to you and may not suit the next tenant, and thus the landlord may simply see these as a liability with a cost to remove.

The fact that you sought and obtained the landlord’s verbal approval is not really relevant, unless there was a specific agreement clarifying whether these should be retained or removed on lease termination.

This is because you were probably obliged under the terms of the lease to obtain the landlords consent prior to carrying out any works of this nature and it is also most likely that there will be a clause in the lease clarifying whether or not any partitions/ improvements can be retained or if these are to be removed.

Very often the obligation to remove or strip out partitions would be included within the yield-up clause which may specifically call for the removal of all tenant fixtures and fittings on termination of the lease. In the absence of a specific clause, it is most likely that you would have to strip out the partitions unless it can be proved that they can and will be used by the next tenant.

More often than not tenants are in a poor position and are often faced with large claims for remedial works at lease termination. It is important, however, to seek advice from a qualified professional specialising in the area of dilapidations as they will be able to interpret the lease and guide you through the process and with a view to minimising your dilapidations liability. Val O’Brien is a chartered building surveyor and member of the Society of Chartered Surveyors Ireland, scsi.ie