Podcast: Preparing for Dilapidations Claims in the Hospitality Sector

Dilapsolutions was delighted to join RWK Goodman on its Legal Thinking Podcast as part of its Hospitality Pressure Points series.

How can hospitality businesses prepare for potentially unexpected costs claimed at the end of a tenancy, after they've made changes to a property? Managing Director, Paul Raeburn and RWK Goodman’s property disputes Partner, Paula Green, join forces to discuss the critical issue of dilapidations claims at the end of a lease for hospitality tenants.

For restaurants, bars, hotels and leisure venues, significant investment is often made into fitting out and adapting premises to create the right customer experience. But what happens when the lease ends and the landlord claims the property must be reinstated?

This podcast focuses on how hospitality businesses could avoid unexpected, potentially substantial costs by planning, understanding lease obligations, and getting professional advice early.

What you need to know about dilapidations claims: Listen here:

Key themes from the discussion:

• What are dilapidations and why do they matter?
• Alterations can create hidden liabilities
• The importance of early assessment
• Negotiation and strategy matter

Getting the right combination of specialist surveyors can considerably affect the value of a dilapidations claim, so it is important to have the right experts on your side. Our expert chartered surveyors uniquely include both distinct disciplines required for the price of one!

• Chartered Building Surveyor to identify disrepair and price remedies
• Chartered Valuation Surveyor to help with a little-known legal rule that means dilapidations damages are capped at the lower of the Cost of the Remedial Works or the impact (if any) on the property’s value. Often this is far less, so the Valuation Surveyor’s input is necessary for the accurate valuation of claims

We are the only dilapidations consultancy to employ the building surveyors (that have expertise is in negotiating down the landlord’s claimed remedial costs), and also (unique to us) valuation surveyors (valuers) who have expertise is in applying the underused statutory “Section 18” Diminution in Value defence to cap the settlement at the lower of the remedial costs negotiated between building surveyors or the impact (if any) on the property’s value. This is usually significantly less.

Key takeaways for hospitality tenants:

• Understand repairing and reinstatement obligations before committing to alterations
• Document everything, especially landlord consents
• Seek specialist advice before signing a lease and during the term
• Budget proactively rather than reactively
• Do not assume a landlord’s initial claim is final
• Instruct the right experts using the TWO distinct surveyors to carry out a dilapidations survey
• Apply Section 18 diminution in value cap, which may limit a landlord’s claim to the actual reduction in the property’s value rather than the full cost of works

Paul highlights:

“With escalating operational costs across the hospitality sector, unexpected dilapidations liabilities can have a serious impact on cash flow and business continuity. Planning offers clarity, control and commercial protection, and our expert surveyors can help you understand your exposure early, challenge inflated claims where appropriate, and put a clear strategy in place to protect your bottom line.”

If you are planning alterations, negotiating a lease, or approaching lease expiry, now is the time to review your position. Speak to our specialist dilapidations surveyors for clear, practical advice. Email paul@dilaposlutions.com or call 0330 094 5446.