More than half West Midlands businesses which rent commercial property are facing unexpected bills as they remain ignorant of their repairing obligations, according to a survey by commercial property consultancy Lambert Smith Hampton.
In a region-wide survey Lambert Smith Hampton found many businesses had not taken professional advice on the repairing obligations they entered into in the lease, nor were they aware of the importance of a Schedule of Condition in limiting the repairs they were liable to do at the end of a lease.
"There is a general lack of understanding of repairing obligations, which means that failure to take advice from the outset is costing Midlands businesses millions of pounds a year.
"This is particularly the case for smaller companies which seem to take the attitude that their property is not important until it becomes a problem," said Alexa Cotterell, director and head of building consultancy at Lambert Smith Hampton.
"Tenants have to understand that if a lease calls for them to keep a property in good repair, they may first have to put it into good repair.
"Many tenants wrongly believe they merely have to return it to the landlord in the state in which they had taken it over, and a number have been successfully pursued by landlords for failing to meet their obligations under the lease," added Ms Cotterell, who is based in Lambert Smith Hampton's Birmingham office.
"Agreeing a Schedule of Condition with a landlord at the start of a lease, and taking professional advice, is vital.
"A series of photographs alone is not sufficient to protect a tenant's interest, but a detailed schedule of condition, comprising photographs and descriptive text will effectively limit the tenant's repairing liability.
"To ensure this is done correctly and forms part of the lease contract, requires professional advice from a building surveyor and a solicitor.
"The majority of businesses we questioned had failed to consult a building surveyor before agreeing a lease, leaving themselves wide open at the end of the lease to landlords insisting on repairs being carried out.
"In one instance a tenant company which had believed it was saving money by not paying around £2,000 for a schedule of condition, was later forced by its landlord to pay more than £200,000 in repairs which it could have avoided with a schedule." Landlords' claims for repairs are contained in a schedule of dilapidations, which sets out repairs which the landlord wants made and their costs.
This is usually served close to the end of the lease, but it can be served at any time. All tenants who receive a schedule of dilapidations from their landlord should contact a building surveyor, said Ms Cotterell.
"On almost every occasion the costs are open to negotiations and it is important to remember that the principle of diminution, enshrined in the 1927 Landlord and Tenant Act, puts a ceiling on a claim for landlords' repairs at the difference between the value of the property in its present state and that if it were fully repaired.
" However professional advice and negotiation skills can make a great deal of difference. We recently settled a dilapidations claim for a tenant at just over £50,000, when the landlord's initial claim was more than £1 million."