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Dilapidation costs are unfair, claim tenants

08 May 2008 by
Dilapidation costs are unfair, claim tenants

Pub companies have been accused of charging outgoing tenants unreasonable amounts for repair work at their properties and scuppering potential sales.

Under most pub agreements, tenants are required to pay "dilapidation" costs, but large numbers are finding that they are being forced to cover the cost of wide-ranging repairs before they are allowed to sell, according to Minesh Patel, partner at Stevensdrake solicitors.

"The pub company's interest is maximising income and profit," Patel told Caterer. "If they can get an outgoing tenant to invest in their property they have a portfolio that is worth more. It is happening across the board. They all see this model and think it works."

These dilapidation charges are causing a lot of potential deals to fall through, he added.

One landlord from the North-west told Caterer that he had been charged £7,000 in the past year for dilapidation costs. The pub company, he said, would pay for the refurbishment only if he switched from a part tie to a full tied lease.

However, the UK's two largest pub owners, Punch Taverns and Enterprise Inns, both insisted that they did not use dilapidation charges to increase the value of their property portfolios at the expense of their tenants.

A spokeswoman for Punch said it was making joint investments with tenants to repair and enhance its pubs.

"We encourage all licensees to get a full survey before they sign a lease to ensure that all works are completed to a high standard before they enter the property so that they reduce their exposure to dilapidations," she said.

Enterprise Inns also rejected the assertions, pointing out that it had invested about £20m in repairs and maintenance over the past 12 months to ensure its buildings were in good condition before tenants moved in.

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By Christopher Walton

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