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Irwin Mitchell predicts rise in dilapidation disputes as office leases come to an end

City of London [1]

Office dilapidation claims can raise “complex legal issues”

The number of dilapidation disputes will rise further as office leases covering 1.4bn square feet of office feet in London expire next year, Irwin Mitchell has predicted.

“We’ve seen a steady rise in the number of dilapidation disputes and I expect to see the numbers continue to go up as a number of long term leases come to an end,” Rob Thompson, partner and head of real estate at the firm, said.

“Some of these dilapidation claims can be significant, with complex legal issues to resolve for both landlords and tenants, and it is vital that businesses have made appropriate provisions in their accounts and that they are otherwise fully prepared to deal with the many issues, technical and legal, that can arise.”

A spokesman for the firm said an analysis of data from Estates Gazette suggested that the value of leases expiring in London in the first half of next year was £1.4bn, with one in 10 relating to long-term tenancies of 15 years or more.

The spokesman said that the amount of office space for which leases are due to expire is “significantly higher” than it was for the first six months of 2012, when their total value was £685.7m.

He said the trends identified in London are in line with the rest of the country, where 41% more office leases were expected to expire in the first six months of 2015 than 2012.

“The issue of dilapidations relates to the obligation that tenants face at the end of the lease to return the property to the landlord in a good state of repair, condition and decoration,” the spokesman said.

“On large premises, dilapidation claims can in some cases run into millions of pounds and can have a considerable impact financially, as the business will usually have taken on additional costs and responsibilities with new offices.”

The spokesman added that the office development boom 15-20 years ago, when a number of long-term leases were entered into, has resulted in an increased number of leases coming to an end.