This is a term that refers to the repairing liability that a lease places on the owner, or occupier of that lease. It is implicit in any lease that unless otherwise stated, each occupier must return the premises in a fully refurbished and ‘as new’ condition, often described as Category A.
Such refurbishment will typically extend to new ceilings, carpets, a full re-paint and the stripping out and making good of all additions/ alterations to a demise that are of the occupier’s doing such as meeting rooms, private offices, communications rooms, kitchens and indeed any and all other partitioning.
This is acceptable in instances where an occupier has taken possession of premises in this same Category A condition at the commencement of a lease. However, if this is not the condition of the premises at the outset of a lease, then very careful attention must be paid to the drafting of the terms and ultimately the lease at the point that they are being negotiated so as to protect the occupier from inappropriate repairing liabilities that do not match the reality of the situation.
If not dealt with properly at the outset of negotiations, occupiers will be exposing themselves to potentially crippling exit costs that will be vigorously pursued by the landlord upon expiry or earlier exit of the lease.
Dilapidations are an important issue whether your business is at the stage of acquiring or of exiting an office.
If disposal by sub-lease is chosen, it usually falls upon the Lessor to take care of the dilapidations at the expiry of the lease, as a properly advised incoming tenant will request a schedule of condition in order to limit their own reinstatement liability.
If disposal by assignment is the preferred path, the Assignor is usually able to pass on the responsibility of the dilapidations onto the Assignee, as detailed in the current lease.