FMs should retain decommissioned building systems. (photo: )
FMs should retain decommissioned building systems.
12.06.2014, 20:38

The End is in the Beginning

Property Law, Regulars

Facilities managers can save their businesses significant occupational costs by understanding dilapidations in building leases writes Jonathan Grimes, dilapidations consultant at multidisciplinary property and construction practice, Pellings.

Facilities managers can save their businesses significant occupational costs by understanding dilapidations in building leases writes Jonathan Grimes, dilapidations consultant at multidisciplinary property and construction practice, Pellings.


There is a stronger link between lease dilapidation provisions and facilities management than many in the industry realise. This is because the actions of FM departments influence dilapidation charges significantly. 

In an era when companies prefer shorter leases and change building more frequently, dilapidation charges (which arise from contractual obligations to restore or reinstate a building to the condition it was in on commencement of a tenancy), continue to be scrutinised. Nevertheless, a systemic approach to reducing dilapidation charges is required by FMs.

Dilapidations and FM budgets

High dilapidation charges on leaving a building will prompt management to cut building-related costs; and the facilities management budget in particular, upon moving to new premises.

Conscientious FMs will therefore monitor factors that might impact on dilapidation charges regardless of whether they are officially assigned this responsibility.

Considering the end in the beginning

Activities undertaken at the start of a lease will often have the biggest impact on dilapidation charges and FMs should always consult landlords about planned changes to the fabric of a building or critical building systems at the earliest opportunity.

Indeed, with the exception of the secondary office rental market (where building upgrades and new system installations are often welcomed by landlords), failing to do so can end up proving costly.

In particular, FMs should always exercise caution when alterations to the general layout of an office call for the reconfiguration or replacement of critical heating, ventilating and air conditioning (HVAC) or lighting systems; and ensure existing systems are left in a decommissioned, if non-functional, state.

For many landlords who offer high-quality office space will insist on reverting back to original system configurations which they perceive to offer the best blank canvas for attracting new tenants at the end of a lease.


Reinstatement planning

FMs can play an important role in advising their companies on how to reduce the cost of reversing changes to a building's fabric or reconfiguring/replacing systems by simply questioning whether there might be alternate ways of achieving intended outcomes.


Spreading the cost

Similarly, FMs who believe their company is likely to incur significant dilapidation charges might lessen any potential financial impact by establishing a sinking fund to smooth cash-flow when sufficient unexpired time remains on a lease.

Alternatively, planning for necessary works to be undertaken over a period of months or years to avoid an unexpectedly large bill on exiting a building, can be effective.


Keep things clean and certified

The impression a building makes on a surveyor appointed by a landlord to carry out an inspection for dilapidation purposes is important, since a poor initial perception of its state of cleanliness can prompt the surveyor to delve deeper into its state of maintenance and result in protracted negotiations or legal action. And to facilitate the inspection process, FMs should always ensure test certificates and required documentation are valid and at hand.

The traditional role of FMs working in the corporate sector is to facilitate an optimal working environment. Given that improvements or alterations to a building can impact on dilapidation charges at the end of a lease, FMs who focus on anticipating and reducing them in advance, clearly add value to any business.

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