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Kingsley Napley recently hosted the RICS Dilapidations Forum. I spoke together with Simon Green, an M&E engineer of Green Building Design Consultants Limited, on the tricky topic of M&E issues in dilapidations cases.
Mechanical and electrical installations and plant are of central importance in modern day buildings. They include air conditioning, lifts, electrical supply, water supply and pipes.
M&E has a peculiar position in dilapidations cases. Although the same legal tests apply in assessing whether the tenant is liable for the cost of repair, M&E presents additional challenges for a number of reasons:
It remains a central requirement of dilapidations claims that the subject matter in question is out of repair. It is accepted that if statute requires changes as part of those repair works, these will generally be recoverable as part of a dilapidations claim. For instance it may no longer be lawful to repair electrical installations without upgrades to another part of the system due to additional safety regulations.
But what where statute enforces replacement of equipment that is not out of repair? A current example is that of R22 gas. This is the refrigerant of many air conditioning systems; however, it is be phased out as part of global efforts to eliminate ozone-depleting hydrochlorofluorocarbons or HCFCs. European Regulation 1005/2009 banned the use of R22 in new air-conditioning systems from 2004, from 2010 it became illegal to use virgin R22 to top up the refrigerant in existing equipment and on 1 January 2015, recycled R22 refrigerant will be outlawed. R22 cooled air conditioning systems will need to be replaced either by way of drop-in replacement refrigerants or by new systems.
If the systems are in working order, but no longer function simply due to the absence of R22, a tenant is unlikely to be responsible for the cost of replacement under a narrowly drafted repairing covenant. There may be other covenants in the lease that allow a landlord to pass the cost onto a tenant - for instance to maintain the plant and keep it in good working order or to service installations and keep them up-to-date.
The legal arguments are not straightforward. Liability will depend on the precise wording of each tenant's lease, and whether landlord or tenant bears the cost of replacement will vary from case to case. What is clear, however, is that this liability is a huge ticking costs time bomb - and will inevitably lead to many landlord and tenant disputes.
Please follow the link to Kingsley Napley’s guide to the Dilapidations Protocol.
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