BUILT ENVIRONMENT JOURNAL

International repair claims

Leases around the world contain repairing obligations – and so there are also claims for failure to repair in many countries

Author: Alison Hardy

24 February 2020

Building surveyors can be a parochial lot, and even more so in the specialist area of dilapidations claims. It is easy to think that our skill set has no application in other countries, and even that dilapidations claims are exclusive to the UK.

However, the leasehold property-owning structure is commonplace across the globe, and in all leases responsibility for repairing the property must be allocated. This means that leases around the world contain repairing obligations  – and so there are likewise claims for failure to repair in many different countries.

Property ownership is becoming ever more globalised, with investors looking beyond their borders to diversify their portfolios and occupiers seeking world domination. Many of our clients hold properties in multiple jurisdictions and so it is important for them – and for us as their professional advisers –to understand how to manage and allocate risk in those different jurisdictions.

As when travelling abroad, it is essential to recognise the value of local knowledge. By taking the advice of a local specialist, it is possible to avoid bear traps and take advantage of each market's nuances.

In France it has been compulsory since 2014 to obtain a schedule of condition when entering into a lease. At the end of that lease, the French Civil Code requires the tenant to return the premises in the state evidenced by that schedule, normal wear and tear and acts of God excepted. Dutch law meanwhile puts almost all repairing obligations on the landlord. The tenant of a property in Amsterdam can require the landlord to carry out works, failing which the tenant can do the works themselves and offset it against their rent.

In my research into repairing obligations and associated claims across the world, I learnt that the term 'dilapidations' is familiar in very few countries. The Australians call dilapidations 'make good', the Japanese use the label 'restitution' and the US calls these claims 'reinstatement' or 'restoration'. Many countries simply don't have a specific name for it – and that might be why there has been a misunderstanding in the past that dilapidations claims don't exist outside the UK.

Most dilapidations claims are resolved by negotiation or mediation. However, I remain surprised that whenever they are fought across the world, many parties go to court to resolve their disputes rather than use expert determination or arbitration.

If landlords and tenants reflected on the potential for disagreements and gave serious thought as to how best to resolve any that might arise, I believe that more leases would include tiered dispute clauses to enable them to be settled more quickly and cost-effectively.

Such clauses include the following escalating steps:.

  • a meeting of directors, or in this instance surveyors
  • compulsory mediation
  • expert determination for some types of claim, for example those related to valuations, and arbitration for others, such as disputes about whether a landlord should consent to a tenant's application for a change of use or to assign the property.

All-inclusive rents, which are popular in the US and making inroads into the UK market, do represent some threat: if every lease were made on this basis there would be no claims for dilapidations as landlords would generally be liable for repairs. However, at the same time we see free ports such as the Abu Dhabi Global Markets adopting English law, which present a growth opportunity for RICS members involved in dispute resolution.

As long as leases continue to be granted parties will allocate risk and responsibility for repair – and with that comes a future rich with opportunities for those with specialist knowledge. 

Alison Hardy is a partner at Ashurst LLP and head of the global real-estate dispute resolution team alison.hardy@ashurst.com

Related competencies include: Landlord and tenant

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