New Leases: why early due diligence matters for dilapidations
For many tenants, dilapidations only become “real” at lease end—often as an unwelcome and unbudgeted cost. Taking time to complete proper due diligence before you sign the lease can materially reduce your exposure and help you plan alterations and occupation with confidence.
While rent, insurance and service charge are obvious commercial priorities, the biggest surprises commonly arise from the repairing, decorating, yielding-up and reinstatement obligations. These clauses can turn an apparently attractive lease into a significant end-of-term liability, particularly where the building is older, has been altered over time, or where the lease places full repairing responsibility on the tenant.
Key due diligence steps to reduce risk
1. Read the repair, decoration, yield-up and reinstatement clauses carefully. The wording matters. A requirement to “put and keep” a property in good repair can create liability beyond simply maintaining what you take on—especially if the premises are already in poor condition or has been extensively altered without obtaining statutory consents by the previous occupier.
2. Commission a pre-acquisition building survey and agree a Schedule of Condition. A survey establishes the property’s condition at lease start and can inform negotiations. If appropriate, a Schedule of Condition (properly referenced in the lease) can help prevent disputes about what condition you are obliged to return the premises in.
3. Negotiate the repairing obligation to match the building and the deal. Try to align obligations with the type/age of the building, your intended use, and the length of the term. In some cases, limiting liability (or documenting the starting condition) is more realistic than accepting full, open-ended obligations.
4. Plan alterations properly and document consents. Obtain landlord consent before works are undertaken and ensure everything is captured and agreed in a Licence to Alter (including conditions, approvals and reinstatement requirements). Undocumented works can cause real problems at lease end.
5. Treat reinstatement as a cost line—not an afterthought. Reinstatement can be expensive and disruptive, particularly where fit-out works are extensive or where the landlord requires a return to “shell” condition. Budget for this early and ensure the lease and licences are clear on what must be removed.
6. Include modern “building performance” checks in your due diligence Leases are increasingly including obligations and cooperation around energy performance, EPC/MEES-related works and sustainability (“green lease”) provisions.
These can affect occupation, alterations, operational practices, access arrangements and cost—so they should be reviewed alongside dilapidations risk rather than in isolation.
7. Don’t leave exit planning to the final months. Allow time for a Dilapidations Liability Assessment well before lease end (often before the final year) to shape your exit strategy, confirm likely exposure and programme works if needed.
Practical Tip
Once the lease is completed, keep a secure, accessible record of all key documents—the lease, any Schedule of Condition, Licences to Alter, drawings/specifications, approvals and completion certificates—so they can be reviewed during the term and when planning exit.
This article is general guidance and not legal advice
