Tenants of commercial premises are often subject to rigorous repair obligations and are required to hand them back at the end of their leases in a similar condition to that in which they found them. In one High Court case, a hotel operator who failed to match up to those obligations was landed with a heavy dilapidations bill.

Commercial tenants are required to comply with the covenants in their leases and breaches of lease covenants can have serious implications, as a recent case shows. It involved a tenant (a car sales and repair business) that wished to end its lease, which ran for ten years from February 2005.

In a decision of importance to landlords and tenants, the Supreme Court has ruled that property owners cannot be held liable for the consequences of disrepair of which they have not been notified.

The case concerned an accident in which the sub tenant of a flat was injured when he tripped over an uneven paving stone on the pathway leading up to the front door of the block where the flat was located. The sub tenancy conferred on him a right to use common parts of the block and he launched a compensation claim against the long leaseholder of the flat.

Virtually all leases have clauses which stipulate that when the lease comes to an end, the tenant must leave the premises in the same condition as they were in when they entered them, and the negotiations over the termination of a lease will often involve a payment by the outgoing tenant to take account of the dilapidations.

In principle, the payment from the tenant to the landlord is to put the landlord back in the position it was in at the commencement of the lease: restoring the asset (the leased premises) to its former condition.