Property Disputes To Rise?
17 Dec, 2014
Office Leases In London Worth £1.4 Billion Come To An End – Amount Of Office Space Where Leases Are Due To Expire Grows By 40%
Real estate lawyers at Irwin Mitchell are predicting a significant rise in the number of dilapidation disputes across London after it revealed 783 office leases covering 1.4 billion sq ft of space are expected to expire in the first six months of 2015.
The data from EGi*, which has been analysed by Irwin Mitchell, estimates that the leases are worth £1.4 billion and that one in 10 relate to long-term tenancies for 15 years or more.
Irwin Mitchell also says that the amount of office space in the London for which leases are due to expire is significantly higher than it was three years ago.
During the first six months of 2012, the leases which expired in London covered a combined 1 million sq ft and had a value of £685.7m.
The trends identified across London are replicated within the UK where 41% more office leases are expected to expire in the first six months of 2015 compared to 2012.
The issue of dilapidations relates to the obligation that tenants face at the end of the lease to return the property to the landlord in a good state of repair, condition and decoration.
On large premises, dilapidation claims can in some cases run into millions of pounds and can have a considerable impact financially as the business will usually have taken on additional costs and responsibilities with new offices.
According to Irwin Mitchell, one of the key reasons for the increase is the office development boom 15-20 years ago when a number of long term leases were entered into which is now resulting in an increased number of leases that are coming to an end.
Rob Thompson, Partner and Head of Real Estate at Irwin Mitchell in London, said:
“We’ve seen a steady rise in the number of dilapidation disputes and I expect to see the numbers continue to go up as the number of long term leases come to an end. Whilst some organisations will undoubtedly renew their lease, many will look to move into newer or larger premises.
“Some of these dilapidation claims can be significant with complex legal issues to resolve for both landlords and tenants and it is vital that businesses have made appropriate provisions in their accounts and that they are otherwise fully prepared to deal with the many issues, technical and legal, that can arise.”
Earlier this year, Irwin Mitchell published its own report into business occupancy trends and revealed that almost 20% of businesses in the UK were looking to relocate or expand their current business premises over the next 12 months.
* Estates Gazette