Lease renewals are often viewed as a legal and commercial exercise. Heads of terms are agreed, rents are negotiated and both parties focus on securing the right commercial outcome.
Yet some of the biggest financial risks rarely appear in those commercial discussions.
From a building surveyor’s perspective, it is often the technical detail hidden within leases, licences and historic property records that determines whether a lease renewal runs smoothly or ends in an expensive dispute.
As Holly Vos, Partner in Vail Williams’ Building Consultancy team, explains, seemingly minor omissions can create significant liabilities years later.
Thankfully, the good news is that many of these issues are entirely avoidable.
Having worked on lease renewals and dilapidations matters across a wide range of commercial properties, there are several recurring issues that can complicate matters – from alterations to buildings that have never been properly documented, to poor schedules of condition that leave you open to future liabilities.
Here are some of the most common technical issues that can create unnecessary cost and complexity during lease renewals.
Alterations that have never been properly documented
Over the life of a lease, tenants frequently adapt their premises to suit changing business needs. Internal layouts evolve, mechanical and electrical systems are upgraded and new fit-outs are installed.
Years later, however, nobody can be certain exactly what was altered, when it happened or whether reinstatement is required because the supporting paperwork is incomplete or missing.
Without clear licences for alterations, both landlords and tenants can find themselves arguing over who is responsible for reinstatement or repairs at lease expiry.
Poor schedules of condition
A schedule of condition should provide an accurate benchmark showing the commercial property’s condition when the lease began.
Unfortunately, many schedules are little more than a handful of poor-quality photographs with limited written commentary.
When a dispute arises years later, that lack of detail can make it far more difficult to establish whether any deterioration in a building’s condition has occurred during the tenancy or not.
A comprehensive schedule of condition should be carried out by a building surveyor and should include detailed written descriptions supported by high-resolution colour photographs and, where appropriate, evidence confirming the operational condition of building services.
Historic liabilities that disappear from view
One of the biggest mistakes made during lease renewals from a technical building surveying perspective, is failing to carry forward historic obligations.
If earlier leases or licences required alterations to be reinstated, those obligations should be clearly referenced within the new lease documentation.
If they are overlooked, landlords and occupiers can have very different expectations about what should be handed back at lease expiry, often leading to costly negotiations or formal dilapidations disputes.
Unclear repairing responsibilities
Another issue we see is ambiguity over who is responsible for repairing different elements of a building.
This is particularly common where responsibilities overlap between tenant repairing obligations, landlord responsibilities and service charge provisions.
Mechanical and electrical (M&E) services, windows and external elements can all become areas of dispute if the lease does not clearly define responsibility.
Ultimately, if a landlord wishes to pursue a dilapidations claim at lease expiry, they must be able to demonstrate their loss. So, clear documentation makes that process considerably easier.
Equally, poorly documented obligations can weaken a landlord’s position where issues of supersession arise, making it harder to recover the full cost of reinstatement works.
