In this section
We were instructed by Starbucks to defend a dilapidations claim on their former shop in Oxford.
Negotiations were more complex because there was a subtenant. Therefore, we were instructed to both defend the dilapidations claim against the Landlord, whilst also negotiating the claim against the subtenant.
The Landlord served their Terminal Schedule of Dilapidations Claim (a report that provides a precise breakdown of repairs that must be scheduled to reinstate a property to its original condition as stated in the lease agreement) at a total sum of £300,000. Our Building Surveyor assessed the Claim at £165,000.
In conjunction with this, we prepared a Diminution Valuation (which refers to the loss of value in the property that was leased due to the dilapidations) that ‘capped’ the Claim at £50,000. The main items within the Schedule that we deemed non-value affective were:
- Works to upper floor ancillary areas – unlikely to be required by another tenant and will inevitably be converted to residential
- Replace floor coverings – the requirement to remove only
- Ground Floor Internal decorations – to be superseded by an ongoing tenant’s fit-out
At the same time, a Schedule of Dilapidations was served on the subtenant.
After extensive negotiations, a settlement was reached at £50,000 against the Landlord, whilst also agreeing on the same figure with the subtenant, which in essence resulted in nil settlement for the client.
This case illustrated the impact Diminution can have on dilapidations claims, saving a considerable sum for the client whilst at the same time negotiating the same settlement with the sub-tenant.