Are you investing in a sick building?

Most businesses insist new staff members undergo a full medical before joining. Yet many companies fail to give property a thorough examination before buying or leasing. To avoid a potential financial headache, make sure your building gets a health check.

Property is one of the most important investments a business can make. And there are any number of specialists on hand – from lawyers to accountants to interior designers – to help smooth the process.

Yet, despite this, many people considering acquiring the freehold or leasehold investment of a property neglect calling in one of the most important experts of all – the building surveyor or bricks-and-mortar specialist.

When timescales are tight and the budget is tighter, the relatively small expense of a building inspection report is often saved. So some companies approach the issue of repairs and maintenance with a we’ll-cross-that-bridge-when-we-come-to-it attitude. This is not a viable strategy for planned maintenance.

Protect yourself against unforeseen costs
To avoid an unpleasant, expensive surprise one, two or several years into tenure of a building, it’s advisable to have the property looked over thoroughly by an expert and given a clean bill of health.

Failure to do so has left a lot of would-be property investors disgruntled and seriously out-of-pocket. For example, tenants reaching the end of their leases are often in for a nasty shock when their landlord points out the breaches in their repairing covenants – and the cost of putting them right.

With forward planning from the beginning of any tenancy – based on a detailed surveyor’s report – this bitter and often expensive pill can be avoided altogether.

A building surveyor’s report can highlight potential problems long before they arrive. Of course, surveys can be tailored to suit individual circumstances, whether the client is acquiring a property for occupation or as an investment.

For a spoonful of preventative medicine from CS2’s team of building consultants, call Mike Gregory on 01604 646480.

Why cutting corners on maintenance is a false economy

Owner-occupiers can choose whether or not to maintain their premises; tenants cannot. When money gets tight, many tenants cut their maintenance budgets – only to regret it later.

Most businesses need premises – whether it be an office, factory, shop, or warehouse. Many of these companies lease their premises from a landlord. One of the commonest mistakes they make – when money is temporarily tight – is to slim down their maintenance budgets for the premises. Over time, however, all buildings deteriorate from lack of maintenance, usually unnoticed by those closest to them – the tenants.

Landlords take a different view on maintenance: the property represents their core business and they naturally want to make sure it is kept in a well maintained condition. The landlord often instructs a surveyor to visit a building and view its condition either during or at the end of the lease.

The object of these visits is, of course, to find out if the premises are being kept in the condition required by the lease. Understanding the wording of any lease is therefore critical.

It’s all in the schedule
Many tenants are not aware that, whatever the condition of the property at the start of their lease, they may be required to put it into good order and maintain it. This obligation may, however, be limited by the specific wording of the lease or, more usually, by a Schedule of Condition attached to it.

The purpose of a Schedule of Condition is to record in detail the condition of the property at the start of the lease. It then limits the repairs the landlord can insist are carried out. This schedule should form an integral part of the lease. It should be prepared by a qualified building surveyor who understands the implications of commercial leases. It should be referred to in the lease and signed by both the landlord and the tenant.

It is simply not sufficient for a new tenant to photograph the premises at the start of the lease, hoping that this will limit the repairing obligations further down the line.

Avoid jeopardising your business
CS2’s David Jay, a chartered building surveyor and a leading expert on dilapidations, says: "Too often leases are drawn up and signed without a qualified building surveyor inspecting the premises for the tenant."

“Solicitors will invariably recommend that a survey is undertaken, but all too often tenants see this as an unnecessary expense. I have seen many tenants live to regret taking this route.”

Depending upon the length of the lease remaining, a Schedule of Dilapidations can either result in the tenant having to undertake work to their premises or agree a financial settlement with the landlord. These financial settlements can also include legal and surveyor’ fees, loss of rent claims and the need to pay additional service charges and insurance payments after the end of the lease term. Consequently, Schedules of Dilapidations can have a significant effect on the profitability of a business.

“Many businesses appear to be completely unaware of the extent of their liabilities and can simply not accept that defects present before signing their lease have become their responsibility,” says David. “With professional advice at the start of a lease, many of these problems can be avoided."
                                          
Three golden rules to avoid dilapidations claims

• Get professional advice from a qualified building surveyor before entering into a lease.
  
• Don’t sign the lease unless you understand the repairing obligations in it.
• Plan to maintain your building and put funds aside each year to do so.

If you are served with a Schedule of Dilapidations get immediate professional advice from a qualified building surveyor. If you end up having to agree a financial settlement with the landlord, this professional advice could result in the claim being substantially reduced.

For more information or advice, contact dilapidations specialist David Jay on 01604 646480.