It looks as if the number of disputes between commercial landlords and tenants over the cost of refurbishments could rise as increasing numbers of leases are coming up for renewal within the next couple of years.
Apparently these disputes are likely to arise over the question of dilapidation claims and might result in costly legal battles as tenants could be faced with huge bills at the end of their lease with landlords looking to claim as much money as possible. Dilapidation costs arise because of a tenant’s legal duty to repair any deterioration or damage to the property at the end of their lease. The trouble is that many of the valuations carried out are highly subjective and open to dispute, and according to a report in Citywire the number of disputes is rising and legal battles can cost millions of pounds.
Jones Lang LaSalle has estimated that 50% of all shopping center and high street leases in Great Britain will come to an end by 2015, with around 50% of these expiring within the next couple of years. Around 6.2 million ft.² of office space in London will be affected by lease expirations or breaks this year with another 8 million ft.² due for we negotiation in the cities of Birmingham, Manchester and Leeds, as well as the South East. Some of these leases are 25 years old and were written during the 80s when the high streets and shopping centers underwent something of a boom. Such properties are likely to be pretty outdated, and there are likely to be disputes over who is liable for the cost. Some landlords are being less than honest as they are trying to claim for refurbishments they have no intention of making, while others are using the potential cost of refurbishments to keep tenants who may want to break their lease early.
According to the Jones Lang LaSalle survey, just 18% of tenants in London negotiating lease renewals between this year and 2016 have reached new agreements on leases.