Four stages of a tenancy

Ken Newton's latest column turns the spotlight on the issues that affect licensees with tenancies and leases The life of a tenancy or lease can be split into the following stages ­ pre-acquisition/negotiation; during the term; renewal; and termination. Richard Staff, a partner with chartered surveyor Kirkby & Diamond, offers the following guidance for each of the four stages: Pre-acquisition/negotiation Commissioning a pre-acquisition survey can provide benefits not only at this stage but also during the life of the lease/tenancy and at the end of the agreement. The survey, if carried out by a surveyor with licensed property experience, should identify defects in the building and shortfalls in any requirements demanded by legislation such as that covering fire precautions, health and safety, lifts and hoists, environmental health, and so on. The survey can also be costed to quantify the initial spend needed to repair the property. This should help speed up negotiations over the terms of the lease ortenancy. Sometimes, the landlord may pay for all, or part, of the repairs within a specified timescale. Alternatively, it is not uncommon for the parties to agree that the tenant/lessee undertakes the work and is compensated by receiving a specified period free of rent. In addition to the survey report, the surveyor should be able to provide guidance on planned maintenance, which will assist putting into place a detailed programme that is budgeted and scheduled to improve the building's performance, avoid wasteful repairs, and avoid damage to the fabric. Advice on planned maintenance may also be of use when licensees present their business plans to their accountants/financial advisers or the banks. During the term of the lease/tenancy Having a planned maintenance programme in place should minimise the risk of possible loss of trade due to disruption, while also meeting contractual obligations to keep the property in a state of good repair and redecorated at specific times. Most landlords police their properties with at least one annual inspection to check if tenants and lessees are complying with their repair and redecoration obligations. If a failure is noted, then, depending on its severity and the terms of the agreement or lease, the landlord is likely to issue either a repair notice or an interim schedule of dilapidations. Failure to comply with these instructions within a reasonable period could result in the landlord undertaking the work and levying the costs as rent due, or even pressing for forfeiture of the agreement in severe cases. If improvements to the property are desirable and are to be undertaken by the tenant/lessee, then it is important to be aware of any additional rent implication and also whether or not the "Licence to Alter", issued by the landlord, contains a reinstatement clause. This clause makes it compulsory for the licensee to revert the property to its pre-altered state at the term. The costs involved with the issue of a Licence to Alter, including the landlord's legal and surveyor's fees, are generally borne by the tenant/lessee. Renewal of the lease If the property has been generally well maintained, all that might happen is for a schedule of specific repairs/works to be incorporated into the renewal documentation, stating the time period within which the specified work has be undertaken. Termination Shortly prior to termination, the landlord's surveyor will inspect the property. This inspection is likely to trigger the issue of a schedule of dilapidations if the property has not been repaired/redecorated in accordance with the lease/tenancy agreement, or if the property has not been reinstated under the terms of the Licence to Alter. If a dispute arises between the parties, then both are bound to the pre-action protocols laid down in the 1999 Civil Procedure Rules. At this stage, the original survey, together with its supporting photography, may well prove invaluable in reminding both parties as to the condition of the property on day one of the agreement. If the landlord has suffered a "loss", then it is normal for opposing surveyors to come to some form of settlement. This loss may include not just the cost of repairs, redecoration and reinstatement works, but also consequential loss relating to fees incurred, rent lost while the property cannot be re-let, void rates, interest incurred, etc.