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Avoiding prolonged lease disputes

Landlord and tenant disputes can be stressful, complex, trivial, time consuming and (these are often the worst) expensive.

A significant or prolonged dispute could prevent a practice from fulfilling its potential or, in extreme cases, cause it to fail completely.

Although a number of disputes are unavoidable, in most cases they can be prevented or placated with some foresight and with a better understanding of the terms of the lease.

 

Common types of landlord and tenant disputes and how to avoid or settle them

1. Repair clauses

Every lease will have a clause dealing with repair. The type of repairing clause will depend on a number of factors: the state and condition of the premises at the date the lease was entered into, whether the premises are part of a larger building and the initial commercial bargaining position of the GP practice and the landlord.

If the practice has not complied with its repairing obligation, the landlord can take steps to remedy the breach and protect its capital investment in the property.

When it comes to breach of repair, the most common options available to a landlord are the service of a schedule of dilapidations (usually done at the end of the lease), the service of a notice to repair or the undertaking of the remedial work by the landlord and recoupment of the cost from the practice.

Limit the possibility of repair claims

A practice can limit the possibility of there being a repair claim by being diligent in its use of the premises, and ensuring that its employees and visitors do not cause damage.

If the premises are in disrepair, the tenant may want to commission a surveyor to carry out a compliance audit to identify the items of disrepair and then carry out the works to bring the premises back into repair.

It is nearly always better for the practice or its builders to carry out the works themselves so as to manage the costs and keep these under control.

 

2. Break options

A break option allows the practice to terminate the lease either on a fixed date or on the happening of a prescribed event. The break option is a protective clause designed to assist the practice should the business fail or should other premises become available on more favourable terms.

It is usually the case that the landlord will require pre-conditions to be satisfied before the lease can be terminated; no landlord will give up a guaranteed income stream without a fight.

If there are pre-conditions attached to the break, it is vitally important that the practice understands and complies with them fully.

Failure to exercise the break option correctly will see a practice on the hook for the remainder of the lease, or in starker terms paying thousands of pounds' worth of rent for premises it does not want.

Read the break conditions

There is no substitute for legal advice, but nearly all of the typical pitfalls associated with break notices could be avoided if the practice recorded all key dates and took time to read the break conditions.

 

3. Service charge

There will sometimes be a clause in the lease dealing with the practice’s contribution towards the service charge that is the common expenses incurred by the landlord and payable by the practice for repair, maintenance and services for the building or estate.

Details of the services rendered by the landlord and payable by the practice will be set out in the lease but service charge provisions are notoriously complex and difficult to understand.

It is sometimes the case that the practice’s service charge contribution is limited to what is fair and proper, is subject to an agreed cap and does not include items of extraordinary expenditure (for instance lift replacement) or any items of a capital or improvement nature.

Despite leases dealing with service charge in a very prescriptive fashion, this does not prevent landlords from occasionally levying a service charge that is unfair and improper.

Don't fall victim to unfair charges

It is therefore recommended that the practice requests copies of the service charge budget and service charge reconciliation accounts each year and takes time to scrutinise the costs incurred. If the accounts don't look right, ask the landlord why.

Not all disputes can be avoided, but hopefully with a bit of awareness and scrutiny the majority can be prevented.

 

How we can help you

At BMA Law, we believe that prevention is better than cure. With this in mind, we have devised a lease audit service, which involves undertaking a full review of your current arrangements and providing you with a report summarising areas of particular concern. This way, we can work through a solution to resolve any issues before they become a problem.

This audit can be undertaken for a discounted price of £950.00 plus VAT for BMA members only. 

Contact BMA Law on 0300 123 2014 or email [email protected] for further details.

Guidance by Leanne O’Brien, BMA Law property expert.