Insight

The hidden costs at lease end, and how to avoid them

28.10.25 3 MIN READ

The end of a lease can often bring unexpected challenges and financial shock, however, if managed early, dilapidations can turn a potential cost burden into a well-planned, fair outcome.

As leases draw to a close, or when exercising a break clause, occupiers are often required to meet specific obligations; repairing wear and tear, reinstating alterations or removing equipment. Without preparation, these requirements can lead to inflated costs, disputes, and operational disruption just when business continuity matters most.

Contributors:

Karen Wilkins

Partner, Commercial Building Surveying

This is where understanding Dilapidations early makes a difference. By identifying obligations in advance and negotiating strategically, occupiers can forecast potential liabilities, plan budgets with confidence, and ensure they only pay for what’s fair.

For buildings used intensively for production, storage, or logistics, the risks are event higher. Reinstatement costs, maintenance obligations, and landlord negotiations can escalate quickly if left unplanned. Early awareness allows occupiers the power to manage these risks proactively, not react to them.

At lease end

Dilapidations are the repairs, reinstatement, and maintenance obligations that a tenant must meet under their lease, typically at the end of the term or when a break clause is exercised.

As your lease nears its end, your landlord may issue a schedule of dilapidations, a formal document setting out the works they believe are required to return the property to its original condition. This may include reinstating alterations such as partitions, racking, or cold stores, repairing wear and tear from heavy industrial use, redecorating or removing plant, machinery, or other tenant installations

These works, or the landlord’s estimate of their cost, form the basis of the claim. If not reviewed and managed early, these claims can escalate quickly, sometimes reaching tens or even hundreds of thousands of pounds. Early awareness and preparation are key to keeping control of both cost and negotiation.

When to Start Thinking About Dilapidations

One of the most common mistakes occupiers make is waiting until their lease event to think about dilapidations. By then, options are limited, and negotiations can become reactive.

Landlords often begin preparing schedules of condition or issuing claims 6 months prior to the lease expiry, however, occupiers who start the process 12-24 months in advance are far better positioned. Forward planning allows time to assess potential liabilities, plan works, and budget accurately, avoiding last-minute disruption and inflated claims later down the line.

The Process

The dilapidations process isn’t just about repairs, it’s about understanding your position, managing risk, and ensuring any claim is fair and commercially balanced.

It begins with a clear assessment of your lease obligations and the condition of the property. A building surveyor can inspect the premises and compare its current state to what’s required under the lease. This early inspection helps identify potential liabilities and provides realistic cost estimates long before the landlord serves their schedule.

Once liabilities are understood, the next stage is strategy. This means deciding whether it’s more cost-effective to carry out reinstatement works yourself or negotiate a financial settlement with the landlord. Expert guidance can help weigh up these options against timing, budgets, and operational continuity to find the most efficient route forward.

When negotiations begin, it’s essential to ensure claims reflect genuine repair obligations, not improvements or upgrades. A building surveyor can liaise directly with the landlord’s representative, ensuring discussions stay factual and fair. Where works are necessary, they can oversee contractors, ensuring everything is completed to the correct standard, so the building is handed back in the agreed condition.

Handled this way, occupiers can close out leases cleanly, avoid unnecessary costs, and protect valuation landlord relationships.

Dilapidations can seem like an inevitable cost of leasing, but they don’t have to be a financial shock.

By starting conversations early, understanding your obligations, and managing the process proactively, occupiers can approach lease-end with confidence, transforming potential risk into an opportunity for cost control and operational clarity.

Get in touch with our Building Surveying Team

Karen Wilkins

Partner, Commercial Building Surveying

Having worked for MEPC at Silverstone Technology Park, Bright Horizons Nurseries, and Majestic Wines, Karen can turn her hand to any job and provide thorough advice to her clients.