The annual turnover of the UK dilapidations industry is estimated at a staggering £3.36bn with an estimated total number of 35,000 cases per year. With mechanical and electrical equipment accounting for up to 60% of the total dilapidation cost, this is a costly oversight that can no longer be ignored.

Since RICS introduced the Dilapidations Protocol in 2012, there has been an increase in the accuracy of cost assessments to support out of court resolutions, with building surveyors managing the process more efficiently. However, they are not normally qualified or experienced in assessing the condition of complex mechanical and electrical equipment.

As an acknowledged expert in engineering aspects of dilapidations and a committee member of the Dilapidations Association, Simon Green comments “The role of the M&E Engineer has been greatly overlooked and underestimated to date when it comes to dilapidations. The Protocol is a less adversarial approach to reducing disputes at the end of a lease, to avoid court proceedings, and an engineer who understands the dilapidations protocol can significantly reduce the length of time and cost both parties spend contesting a dispute.”

Findings from the RICS Dilapidations Forum Survey underlines the importance of professional advice on dilapidations claims. The report found there was an average reduction of 32% between the initial claim and final settlement where surveyors acted on behalf of landlords, and an average reduction of 50% where surveyors act for tenants.

Simon, who is Managing Director of Green Building Design Consultants, regularly presents to major surveying practices and RICS about the practical issues involved in resolving dilapidations claims. He believes that by using the combined services of a Building Surveyor and an M&E Engineer, this fundamental area can be successfully addressed. Simon explains, “The Building Surveyor should manage the dilapidations assessment, but bringing an M&E Engineer on board will significantly reduce risk and add clarity once the initial review has taken place – bearing in mind most of the services are often hidden about the ceiling. By working in close collaboration the resulting schedule and quantified demand can be prepared more accurately, leading to earlier dispute resolution, significant reduction in both time and costs and, of course, the avoidance of court proceedings.”

Amidst the backdrop of Covid-19 pandemic, it is not entirely clear what the long term impact on businesses, and therefore dilapidations, will be. It is likely that proactive maintenance and repairs could become less of a priority for tenants, potentially leading to deterioration which brings the building below the stated standards of repair. For landlords, eager to maintain their freehold values as much as possible, they could serve tenants notices more quickly to carry out repairs to protect their investment.

Simon explains “With lease terms continuing for some during this pandemic, despite government measures, we could be looking at significant unplanned expenditure for tenants and landlords throughout the UK. I would always recommend that professional and legal advice is sought at the earliest opportunity, but particularly in the current climate, to allow both tenants and landlords to navigate complex lease obligations and avoid dilapidations scenarios.”

As the UK carries on through the pandemic and into the ‘new normal’ it remains to be seen if the number and cost of dilapidations liabilities will become even more prominent.

To discover more about the art of resolution, download Green Building Design Consultants’ white paper which details the crucial role the M&E Engineer plays in reducing dilapidations liabilities and the suggested process for engineering inspections.

Source https://www.ibblaw.co.uk/insights/blog/dilapidations-uncovered

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