ALTERED REALITY

I have written before about reinstatement of tenant alterations at lease end/break.

In the context of dilapidations, the reinstatement element can make up a significant part of the total claim; for offices, it can comprise the most part.

The starting point is to be certain that reinstatement is a persisting contractual obligation; remember that alterations carried out under a previous lease (subsequently renewed) could have become part of the demise and, therefore, no longer alterations/improvements to be reinstated.

For this blog, I consider the most common scenario: leases that require reinstatement of tenant alterations (in the Alterations and/or Yield Up clause) carried out during the currency of that lease and that alterations were so made.

Commonly, the wording of reinstatement obligations is very brief, neither requiring a particular form of notice nor a minimum notice period. Whilst each specific form of wording should be considered by your property lawyer, a couple of salient authorities are:

• Westminster City Council -v- HSBC Bank Plc (2003) 1 EGLR 62: In which it was held that the Schedule of Dilapidations (containing, inter alia, claimed reinstatement of tenant alterations) was of itself, adequate notification to the tenant.
• Scottish Mutual Assurance Society Limited -v- British Telecom Plc (1994): A Licence To Alter provided that the tenant “should reinstate the property to its original design and layout at the expiry of the lease at its own cost should the Lessor reasonably so require” (emphasis added). The Landlord served a Schedule of Dilapidations on 18th June, 6 days before lease expiry. The Tenant argued that the word “reasonably” should apply not only to the reasonableness or otherwise of the requested reinstatement, but also to the timing. The judge found for the Landlord. Theoretically, the Tenant could remain post lease end to complete the works.

These authorities work well for landlords.

Tenants may prefer to better codify reinstatement obligations in both new acquisitions and renewal leases. For example, they may prefer to require separate and clear notice no later than 3 months before the term end date, but not otherwise.

If you're a commercial tenant and require advice on reinstatement obligations or general dilapidations claims enquiries, please email Paul at paul@dilapsolutions.com.