Dilapidations and reinstatement at lease end

What are dilapidations and reinstatement?

The two terms are related but distinct. Dilapidations refers to a tenant's failure to meet the repairing and maintenance obligations in the lease, and, by extension, to the works or the financial settlement required to remedy that at the end of the term. Reinstatement is the obligation to remove the alterations and fit-out the tenant made, the partitions, rooms, cabling and finishes of the Category B fit-out, and return the premises to an agreed condition, commonly the state it was in at the start of the lease. In short, dilapidations is largely about the condition and repair of the space, and reinstatement is about undoing the changes made to it.

The schedule of dilapidations

Towards, or at, the end of a lease, a landlord typically serves a schedule of dilapidations: a document listing the breaches of the lease obligations and the works required to put them right. It sets out what the landlord considers the tenant must do, or pay for, to hand the premises back in the required condition. The tenant, often with professional advice, reviews and can negotiate the schedule, because the initial schedule reflects the landlord's position and there is usually room for discussion about what is genuinely required. The outcome may be that the tenant carries out the works, or agrees a financial settlement in lieu of doing them.

Why it catches tenants out

• It is years away at fit-out: the reinstatement obligation is agreed at the start but only bites at the end, so it is easily forgotten.
• The cost can be significant: removing a fit-out and making good can be a substantial project in its own right.
• It is not budgeted: tenants who have not planned for it face an unexpected cost at exactly the point they are moving out.
• The obligations are in the lease detail: exactly what must be repaired and reinstated depends on the specific lease wording, which is often not revisited until exit.

The theme is that dilapidations and reinstatement are predictable, they are written into the lease, yet they surprise people because they are not thought about until the end.

How to prepare for a lease exit

• Understand the obligations early: know from the lease what repairing and reinstatement obligations you have, ideally from the outset, not at exit.
• Keep records: retain the schedule of condition from when you took the space, and records of your fit-out, so it is clear what was there and what you changed.
• Budget for it: treat reinstatement as a foreseeable end-of-lease cost and set aside for it rather than being surprised.
• Plan the works in good time: reinstatement and making good take time and organisation, so plan them well before the lease ends, not in the final weeks.
• Take advice: professional advice on a schedule of dilapidations often pays for itself, as the initial schedule is a negotiating position.

Getting the reinstatement done

When it comes to actually carrying out reinstatement and making-good works, it is a fit-out project in reverse, removing alterations, repairing and returning the space to the required condition, and it benefits from a contractor who understands both the building and the obligation. Arkomax carries out office reinstatement, refurbishment and making-good works across Dublin and Ireland. See our commercial office renovations service and our projects, and get in touch to discuss a lease-end reinstatement.

For tenant obligations under a lease, see Citizens Information on commercial leases.

Frequently asked questions

• What are dilapidations at the end of a lease?

  Dilapidations are breaches of a tenant's lease obligations to repair and maintain the premises, and the term also covers the works, or payment in lieu, needed to put them right at lease end. A landlord typically serves a schedule of dilapidations listing what must be done to hand the premises back in the required condition.
• What is reinstatement in a commercial lease?

  Reinstatement is the obligation to remove the alterations and fit-out a tenant made, such as partitions, rooms, cabling and finishes, and return the premises to an agreed earlier condition, often the state it was taken in. It is distinct from dilapidations, which is largely about the repair and condition of the space.
• Can a schedule of dilapidations be negotiated?

  Usually, yes. The initial schedule reflects the landlord's position, and tenants, often with professional advice, review and negotiate what is genuinely required. The outcome may be that the tenant carries out the works or agrees a financial settlement in lieu. Because it is a negotiating position, advice often pays for itself.
• How do I avoid a surprise dilapidations bill?

  Understand your repairing and reinstatement obligations from the lease at the outset, keep the schedule of condition and records of your fit-out, budget for reinstatement as a foreseeable cost, and plan the works in good time rather than the final weeks. Taking advice on any schedule of dilapidations also helps.