IN the wake of retailer Wilko having called in administrators, putting more than 12,000 jobs at risk after it failed to agree a rescue deal, Hardies Property & Construction Consultants is urging landlords and tenants to seek advice on dilapidations ‘before it’s too late’.
By next week, all branches of Wilco in the UK will be shut with some of the vacant units set to become branches of Poundland.
With the number of retail units lying empty in Scotland already at its highest level for 18 months, with vacancy rates in Q2 2023 worsening to 15.9%, Hardies is advising landlords and tenants to consider their positions regarding dilapidations before the end of the lease.
John Mackie, partner, Hardies Property & Construction Consultants, said a pressing question landlords should consider during an ongoing lease with a tenant is when to serve an interim schedule of dilapidations. While many landlords opt to sit back and reap the rental income, Mr Mackie believes they would be better advised to consider if their tenant is actively maintaining the fabric of the building.
“The issue is highlighted by the recent Wilko administration since the likelihood of landlords receiving any money for dilapidations when their tenant enters administration is next to none,” he explained.
Mr Mackie suggests landlords should consider being more proactive, given there are usually opportunities within lease agreements to undertake inspections and serve for schedules of dilapidations during lease terms rather than waiting until the end of the lease.
“There are many retail units lying empty on high streets up and down the country right now, some with leases still being paid for. Is this the opportune moment for landlords to serve an interim or is it already too late?
“Other landlords with trading tenants might prefer not to risk annoying tenants by serving an interim, and instead wait until the conclusion of the lease, but I would argue that regular and and honest communication between landlords and tenants will create better working relationships. Indeed, landlords may be willing to support tenants with upgrading opportunities.”
Mr Mackie advises tenants to regularly inspect the condition of their buildings.
“For tenants approaching the final years of a lease and concerned about what the next step should be, I would advise that, rather than their first thought be about leaving, they should consider their lease liability, potential dilapidations claims and how much a new lease will cost,” he said. “There are so many buildings in need of repair, and we are ideally positioned to assist both landlords and tenants with dilapidations claims.”
Last year Hardies’ building surveyors processed dilapidations for over 10 million square feet of properties surveyed throughout the country.
