Could Brexit affect your Dilapidations Liability?

As you sit and watch the ever changing headlines following the recent EU referendum, dilapidations and reinstatement is probably not top of your agenda when thinking about your real estate, however it may be worth moving this up the order.

It isn’t just your occupational lease that dictates dilapidations and reinstatement liabilities. A key factor in determining a dilapidations liability is the cap on a landlord’s claim based on the loss in value of the building. This is largely driven by what the landlord or the open market would do with a building at the end of a lease. In a strong market with high occupier demand, refurbishment and redevelopment is more likely and this will reduce a dilapidations claim.

Following the vote for Brexit, what might previously have been a certain plan for refurbishment or redevelopment might now be, at least for a period of some time, less certain.  As a consequence these statutory caps are less likely to take effect in a weaker market.

Whilst the full impact of the EU referendum is yet to be felt, it is possible that landlords will postpone refurbishments or redevelopment decisions. They are more likely to opt to pursue short to medium term lettings in order to wait for the uncertainty in the market to clear. We anticipate that dilapidations and reinstatement damages will be aggressively pursued as landlords seek to ensure the best performance of their asset.

Hopefully you’ve already had an assessment of your potential dilapidations liability within your financial accounts. However given the potential changes to the property market and your landlord’s future plans resulting from the Leave vote, it is worth revisiting your potential liabilities to ensure you are suitably prepared to mitigate your liabilities. Dilapidations is a highly complex topic and you need to ensure you have the right specialist advising from the start.

To read more about CBRE’s views on Brexit, download our “The Long Goodbye?” research report

 

Brexit, Building Surveying, Dilapidations, Landlords, Occupiers,