Insight: Jon Rowling

Green Dilapidations: more sustainable commercial property leases

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Commercial building owners and occupiers are increasingly looking to fulfil their net zero carbon ambitions with measures beyond more sustainable development and energy performance practices. In particular, the current property leasing cycle and non-sustainable dilapidations processes are generating quantities of waste and carbon, which can be mitigated with a more sustainable approach: Green Dilapidations.

TFT’s Green Dilapidations services are designed to help clients reduce the additional material, resources and cost associated with repeatedly fitting out and stripping out commercial property spaces over their lifetime. Taking a long-term view of tenancy, occupier and market requirements, we help our clients benefit from a more efficient, sustainable dilapidations process for both landlord and tenant.

Our support is rooted in facilitating better collaboration between stakeholders. That means the landlord and tenant of course, but also agents and the wider supply chain. Our sustainable building knowledge, commercial understanding and dilapidations expertise helps to formalise a better system as a whole.

We see a greater appetite from our landlord and tenant clients to adopt Green Dilapidations services. A notable occupier client is one of the leading property litigation practices, who we are helping to exit their existing offices in this way. Our recent seminar on green dilapidations in June was well attended by a cross-section of the industry, showing the breadth of interest for specialist advice on the subject.

It’s not just for offices either, and can be used for retail, industrial and other commercial property sectors.

We’re here to help you do dilapidations in a better way. Get in touch with Jon Rowling to discuss how our dilapidations and sustainability expertise can help reduce the carbon impacts of your property lifecycle.

Download our brief service outline here.

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Vacant possession: a new definition and advice for tenants

There has been a new Court of Appeal decision about vacant possession (“VP”) which changes what dilapidations professionals thought that VP meant after an earlier decision last year. That decision might have refined what we thought it might have meant since 2016, which probably changed what we had thought it meant prior to that. 

What’s changed, and what should you do about it?

Summarising the new decision on vacant possession:

The Court of Appeal (applying the facts of the case in front of it) has this week said that VP relates to the lack of the “trilogy of people, chattels, and interests”.

That wipes out what we thought VP meant after the case that was appealed was handed down last year.  That case had led us to believe that VP could fail to be achieved if too many of the landlord’s fixtures had been removed.  Now, it seems, a tenant can remove as many bits of the premises as it likes, VP can still be achieved, and the landlord’s remedy is in damages (only).

In 2016, obiter comments in a high court judgement (which mean those words in the judgement do not form part of a precedent) suggested that, if a tenant had left too many tenant’s fixtures in place (in circumstances where tenant’s fixtures did not form part of the premises – as defined) then VP would not have been achieved in that case.

What should a tenant do to achieve vacant possession?

  • When exercising a VP conditional break, be cautious.  Get legal and surveying advice.
  • Prepare early. Remove all people, chattels and interests and think about also removing your tenant’s fixtures if they do not form part of the demised premises.  If you are not sure if an item is a chattel or a tenant’s fixture; remove it.  It you are not sure if an item is a tenant’s fixture or a landlord’s fixture; remove it.
  • Make it clear to your landlord that you are leaving, hand over keys, alarm codes etc.
  • Don’t venture back into the premises after the break date.
  • Make sure you also have complied with all other break conditions (such as getting notices right, making sure all payments have been made – even if not demanded by the landlord).

If there is no VP condition, but there is different wording, then you might be required to do other things.  If you are required ‘not to be in occupation’ then the process is less clear. It is probably less onerous than VP but nobody has been to court yet to find out.  Don’t be the one to go to court to find out! To be cautious, assume it means VP.

If the condition is to comply materially then that is very very difficult to do.  Assume you have to do everything perfectly and you have a chance.  But beware late reinstatement notices from your landlord changing the goal posts after a date when you can’t do anything about it.

If the condition is to comply absolutely then you probably have no chance, but if it is worth trying then try. 

Balance of power

The Court of Appeal decision has changed the balance of power more towards tenants if there is a VP condition to comply with.  But, the power still really lies with the landlords because courts have been very strict in making sure tenants comply with their obligations correctly. 

As this week’s judgement points out, that does not mean to say that the break clause should be interpreted unfairly in favour of landlords; rather, once the clause has been interpreted judges will expect strict compliance by tenants.

The cases referred to:

  • Capitol Park Leeds plc (1), Capitol Park Barnsley Limited (2) v Global Radio Services Limited [2021] EWCA Civ 995
  • Capitol Park Leeds plc (1) v Global Radio Services Limited [2020] EWHC 2750 (Ch)
  • Riverside Park Limited v NHS Property Services Limited [2016] EWHC 1313 (Ch)

Vacant Possession just got more complicated for tenants

TFT dilapidations specialist Jon Rowling explains a new concern for commercial property tenants trying to achieve ‘vacant possession’ for a lease break. They may have been careful not to leave too much behind, but now they also need to be careful not to take too much away.

Tenants wanting to exercise a lease break option always have to be cautious, because the conditions are interpreted strictly and precisely by the courts. With one false move, the lease term continues.

Having to provide vacant possession (VP) is still a common hurdle. Whilst there is case law supporting its definition, uncertainty remains as to what tenants need to do to achieve it. 

Since Riverside Park Ltd v NHS Property Services Limited [2016] EWHC 1313 (Ch), there has been some uncertainty as to whether tenants only need to remove chattels, or whether fixtures also need to be removed. An additional complication arises if the break clause condition calls for the tenant to be “not in occupation”, because it’s not always clear what that means. 

Surveyors have been hoping for some new case law to help us guide our clients. Unfortunately, the recently reported case of Capitol Park Leeds plc v Global Radio Services Ltd [2020] EWHC 2750 (Ch) does not help!

Here’s why:

In this case the tenant had to provide vacant possession of the “Premises” (as defined). The court held that the tenant failed to do so, and therefore the break failed. It failed because the tenant failed to yield up the Premises. In fact the question of VP doesn’t seem to have been necessary to consider because the decision seems to have made based on the definition of the Premises.

The tenant knew they needed to remove their own fit out and did so.  However, they also removed (or had previously removed) significant elements of the landlord’s building including air conditioning, ceilings, fire barriers, radiators, lighting, floor boxes, small power etc.

The definition of the “Premises” included:

“… all fixtures and fittings at the Premises whenever fixed, except those which are generally regarded as tenant’s or trade fixtures and fittings…”

Essentially, because the tenant had removed landlord’s fixtures, it had not yielded-up the Premises. Too much of the Premises was missing.

Tenants who have to achieve VP have always been cautious about leaving too much behind, but now they also need to be cautious about taking too much away. Potentially, the fact that the items removed by the tenant in this case were so substantial might mean that other tenants who remove just a little bit too much could draw a distinction between their case and Capitol Park v Global Radio?

The case is also interesting, particularly for surveyors, because it raises further commonly encountered issues:

  1. That ‘agreements’ with your opposite number should be recorded in writing, to avoid the uncertainty and expenses of an estoppel argument
  2. That some surveyor-to-surveyor correspondence, and surveyor-to-client correspondence can be seen by the court
  3. That tenants preparing for a conditional break, where building works are required to be completed, should press ahead with that work until such time as a financial agreement and surrender is agreed between the parties. Don’t stop work in anticipation of a settlement being reached
  4. Riverside v NHS was mentioned in the judgement, but we still don’t know whether tenant’s fixtures also need to be removed to achieve VP
  5. The case didn’t consider what the phrase “not in occupation” means.

Capitol Park Leeds plc v Global Radio Service Ltd considered whether the removal of landlord’s fixtures was enough to frustrate a VP condition to a break, or whether the removal of the landlord’s fixtures should be considered as part of a dilapidations claim, after the successful exercise of the break. The judge preferred the former option, but leave to appeal has been granted.

Are you a landlord or a tenant of commercial property with queries about a lease, dilapidations or dispute resolution?

Contact Jon Rowling to discuss your case and the best way forwards.

Commercial property
Commercial property tenants remain uncertain about ‘vacant possession’ definitions after a recent case between Capitol Park Leeds plc v Global Radio Services Ltd

The TFT Purple Book: A guide to Dilapidations in the UK

The TFT Purple Book: A Guide to Dilapidations in the UK is a comprehensive guide which identifies the legal context, best practice, background to how and why dilapidations is dealt with as it is, and addresses areas of legal uncertainty. It aims to serve as a single point of reference from which the reader can develop a solid foundation of knowledge. It even considers cattle, children and ‘chattels-vegetable’ – and not many text books can make that boast.

You can read more and order the book here.

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Dilapidations in England and Scotland. Our new white paper highlights the differences.

To celebrate the continued success of our Edinburgh office, and the increase in dilapidations instructions we are managing north of the border for our clients, we present a paper on recent changes to Scottish dilapidations law and procedure, and we identify the main differences between dilapidations in Scotland and south of the border in England and Wales.

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TFT Dilapidations Flow Charts

The TFT Dilapidations Flowcharts are an industry first. They explain and demystify the various steps involved in a typical end-of-lease dilapidations dispute, identifying how a dilapidations liability is calculated. For the first time, complex issues such as the classification of fixtures and chattels, the reinstatement of alterations and disrepair are explained visually. The dilapidations dispute resolution process and options are also identified.

We hope the TFT Dilapidations Flowcharts will become a useful industry-standard resource for both clients and other surveyors to help improve the dilapidations process. At present, partly because dilapidations disputes can be highly complicated but partly also because many who dabble in dilapidations do not know the background to the issues, dilapidations disputes can become contentious, costly and time consuming. The TFT Dilapidations Flowcharts are part of our effort to improve this area of practice.

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TFT demystifies dilapidations

The TFT Dilapidations Flowcharts are an industry first. They explain and demystify the various steps involved in a typical end-of-lease dilapidations dispute, identifying how a dilapidations liability is calculated. For the first time, complex issues such as the classification of fixtures and chattels, the reinstatement of alterations and disrepair are explained visually. The dilapidations dispute resolution process and options are also identified.

We hope the TFT Dilapidations Flowcharts will become a useful industry-standard resource for both clients and other surveyors to help improve the dilapidations process. At present, partly because dilapidations disputes can be highly complicated but partly also because many who dabble in dilapidations do not know the background to the issues, dilapidations disputes can become contentious, costly and time consuming. The TFT Dilapidations Flowcharts are part of our effort to improve this area of practice.

Jon Rowling, Technical Partner:

We created these flowcharts to help demystify what can be perceived as an impenetrable and complex area of surveying and the law. Hopefully, with wider knowledge within the professions, dilapidations disputes can become less contentious, easier to understand and easier to settle. We hope you find the TFT Dilapidations Flowcharts helpful, perhaps even interesting!

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The TFT two step approach to supersession

Supersession is an undefined quasi-legal term used in dilapidations disputes. In broad terms, most understand it to mean that the actions of the landlord might (or might not) affect their ability to claim certain items from their former tenants. For the first time, an approach to supersession has been developed, based on standard principles of contractual damages claims, which suggests what issues are relevant and how to decide whether the landlord’s claim should or should not be ‘superseded’.

The TFT Two Step Approach to Supersession was used as the basis for the first instance of formal RICS guidance on this concept, within the current edition of the RICS Dilapidations Guidance Note (England and Wales), the author of which was TFT’s Jon Rowling.

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TFT’s paper on dilapidations ADR identifies the options available in the UK

An article by Jon Rowling, who heads TFT’s dilapidations, service charge and dispute resolutions services, identifies alternative forms of dispute resolution for dilapidations disputes in the United Kingdom. Published in the Journal of Building Survey, Appraisal & Valuation Volume 6 Number 2, it suggests that the various forms of ADR should always be considered as a preferable approach to litigation.

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