Calculating Section Eighteen Diminution in Industrial Property Reversionary Valuations
Section 18 caps industrial dilapidations at actual reversionary value loss, stopping landlords from recovering repair costs that exceed open market impact.
Structural Alterations
Meaning
The physical modifications made to the load-bearing elements of a building, such as beams, columns, external walls or foundations, change the structural integrity of the property. Any structural alterations require the landlord’s prior written consent and must comply with building regulations to ensure safety and stability. If a tenant carries out these works without permission, they are usually required to restore the building to its original layout at the end of the lease.
Tenant Liability
Tenants who modify the structural elements of a leased building must be prepared to face significant reinstatement liabilities when the lease expires. These structural alterations can include installing new mezzanine floors, creating new openings in load-bearing walls or modifying the roof structure to accommodate heavy plant machinery. The tenant must cover the cost of removing these additions and repairing any damage to the building’s core structure.
Consent Process
Before commencing any major works, a tenant must apply to the landlord for a formal licence to alter. This consent process involves submitting detailed architectural drawings, structural engineering calculations and method statements for approval. The landlord will review these documents to ensure that the proposed works will not compromise the safety or value of the building, and may require the tenant to provide a financial bond to cover the cost of future reinstatement.
This rigorous review prevents disputes and ensures that the asset remains insurable and safe for occupancy.
Inspection Review
Surveyors will inspect the property during and after the completion of the works to verify that they have been carried out in accordance with the approved plans. This inspection review ensures that the structural alterations have not caused any damage to the surrounding structure and that the work complies with all relevant safety standards. Having a detailed record of this review is essential for both parties when negotiating the terminal dilapidations claim.