What is the difference between an Interim Schedule of Dilapidations, Terminal Schedule of Dilapidations and Final Schedule of Dilapidations?

Posted on July 4, 2023 by admin

If a tenant mistreats a property or fails to maintain it according to the terms of their lease, the landlord can issue a Schedule of Dilapidations. This process provides a much-needed failsafe for landlords, helping to protect their investment and clarify a fair, appropriate way forward. And for tenants, it helps to avoid nasty surprises – like being presented with a huge repair bill at the end of the tenancy.

What are the different types of Schedule of Dilapidations?

There are, in fact, three different Schedules of Dilapidations: Interim Schedule of Dilapidations, Terminal Schedule of Dilapidations and Final Schedule of Dilapidations. Broadly speaking, they all fulfil the same goal of setting out the tenant’s obligations to bring the property back up to scratch. The difference is they’re used at different points in the lease period.

Let’s take a look at the three options and see how they’re used:

Interim Schedule of Dilapidations (often referred to as interim dilapidations)

This first option is issued during the course of the lease, for example, if a landlord is concerned that proper maintenance isn’t being carried out. The aim of the Interim Schedule is to remind the tenant of their obligations and clarify what’s expected – thereby helping to nip any neglect in the bud and protect the value of the property, while also protecting the tenant from higher repair costs further down the line.

Terminal Schedule of Dilapidations

The somewhat more ominous-sounding Terminal Schedule is used towards the end of the lease, usually within the last 18 months to three years of the lease. This schedule of condition is often more detailed than the Interim Schedule, listing items of disrepair that need to be fixed before the end of the tenancy.

Final Schedule of Dilapidations

The Final Schedule is issued after the lease has expired, in the event that required repairs haven’t been carried out. Similar to the Terminal Schedule, this one will generally set out in detail what works are needed, but, as the lease has already expired by this point, the Final Schedule may also include the cost of lost rent while the repairs are being carried out.

Professional Support from Leading Chartered Surveyors

Managing dilapidations while maintaining a good tenant–landlord relationship can be especially tricky, so professional support is a must. Perry Hill’s team of chartered surveyors guides both landlords and tenants through the schedule of dilapidations process – from carrying out inspections and estimating costs, to issuing paperwork and giving trusted advice.

Annual Building Service Charges: Your Questions Answered

Posted on February 24, 2023 by admin

As a leaseholder, you may have to pay an annual service charge towards the upkeep of your building or development. But what is this charge and what exactly does it cover? Here, we look at the most common questions people have about building service charges.

What is an annual building service charge?

The annual service charge is the fee you pay to cover the overall management of your building. Typically, this fee is levied by a managing agent – a third-party company responsible for looking after the building or development. It’s important to note the service charge is different to ground rent, which is the financial consideration payable under the terms of the long lease between you (the lessee) and your landlord.

How much is a typical annual service charge?

Service charges can vary dramatically. The average service charge is around £1,800 to £2,000, although it can be significantly higher for luxury properties in prime locations.

What exactly does the annual service charge pay for?

The service charge includes all the pro rata costs for the repair and maintenance of the building, including its common areas. In other words, the service charge pays for all the things – big and small – that make your building or development a safe and comfortable place to live. This usually includes:

Everyday maintenance and management
Repairs to the building or development as required
Buildings insurance, and health and safety measures
Gardening and maintenance of the grounds
Cleaning of communal spaces and windows
Wages for any staff employed at the development (for example, a concierge)
The managing agent’s professional fees

What are the advantages of the service charge?

If you’ve ever lived in a poorly-run building, you’ll know it can really impact your quality of life, not to mention the value of your property. A well-run building or development – i.e. one that is properly serviced, comfortable and safe – is a far more pleasant place to live, and a better financial investment.

How do I know the money is being used properly?

This is one of the biggest concerns people have about service charges, yet a scrupulous managing agent will always be transparent about how your money is being spent. For example, at Perry Hill, each building or development that we run has its own dedicated bank account for building charges and, every year, we share a detailed breakdown of the account with payees, setting out how the money has been spent.

With 25 years’ experience managing buildings and developments across the South East, Perry Hill understands how to deliver maximum value for development owners and residents. Learn more about our trusted approach to property management.

How a Red Book Valuation Can Reduce Your Inheritance Tax Liability

Posted on December 12, 2019 by admin

We all know that Inheritance Tax (IHT) can cost families a lot of money when a loved one dies. But did you know that there are steps you can take to reduce the amount of IHT payable? One way is to get an independent valuation of property assets (also sometimes known as a ‘probate valuation’).

What is IHT?

IHT is essentially the tax payable on assets left behind when a person dies. In the current tax year (2019/2020), anyone is allowed to leave an estate worth up to £475,000 – which includes the recently introduced £150,000 ‘main residence’ allowance – without being subject to IHT. Estates above this threshold are subject to a tax of 40%, on the amount above the threshold.

IHT applies to assets such as property, investments, vehicles and cash. In many cases, property makes up the largest part of a person’s estate – and, therefore, is the element most likely to push an estate over the IHT threshold.

Getting an independent probate valuation for IHT purposes

At Perry Hill, we work with families and representatives of the deceased to provide an independent value of property assets for probate. This valuation process applies whether the deceased had left a will or not. It’s absolutely vital this valuation is accurate because the market value of the property at the date of transfer (usually, the date of the deceased’s death) is used to calculate how much IHT is payable.

We also work with property owners to provide comprehensive assessments and valuations for the purposes of estate planning – thereby helping clients proactively reduce the tax burden for beneficiaries.

As with any valuation being used for tax purposes, probate valuations must be carried out by a professional member of RICS, the Royal Institution of Chartered Surveyors, according to RICS Red Book standards. That’s why the valuation is often referred to as a ‘Red Book valuation’.

Reducing your IHT liability

Whether you’re navigating the difficult probate process, or putting together your own estate plan, working with a professionally recognised valuer is the safest way to ensure you get a fair valuation and that you or your loved ones don’t pay any more tax than necessary.

Perry Hill’s independent, RICS-accredited chartered surveyors provide valuations across London and Surrey, helping to ensure our clients’ best interests are represented. Find out more about our Red Book valuation services.

Do I Need a Home Buyer Report or a Building Survey?

Posted on August 20, 2019 by admin

We’re often asked what exactly is the difference between a Home Buyer Report and a Building Survey. Our RICS-registered Chartered Surveyors provide both Home Buyer Reports and Building Surveys for commercial and residential properties.

In this article, we’ll explain the differences between a Home Buyer Report and a Building Survey so that you get the property inspection that you need as part of a house purchase, sale or lease.

What is a Home Buyer Report?

A Home Buyer Report is a type of property survey recommended to the home buyer that provides a review of a property and lists details regarding its structure, condition and other factors that could affect the property.

Considering the costs involved with purchasing a property, it’s a good idea to consider having a property survey taken so you can get a clearer understanding of exactly what you are paying for.

What is a Building Survey?

A Building Survey is another type of property inspection for both commercial and residential properties. A Building Survey goes into a lot more detail than a Home Buyer Report by providing much more detail in the written report.

Building Surveys carried out by Perry Hill Chartered Surveyors provide a 30-page report with around 200 photos, a list of external and internal actions and the likely cost to fix.

Building Surveys are particularly common for older properties and those with obvious structural concerns and for buyers wanting to know the potential cost of problems with the property they are buying. Though the Home Buyer Report does not go into as much detail, it is still adequate inspection for many home buyers.

What is the difference between a Home Buyer Report and a Building Survey?

One of the main differences between a Home Buyer Report and a Building Survey is the detail in which a Building Survey goes into. A full structural Building Survey gives a much more comprehensive review of the property and offers professional advice on the issues raised in the report.

A Home Buyer Report follows a standard format and clearly highlights any property defects. Where Building Surveys can be tailored more to the property and concerns of the party wanting the building inspected, a Home Buyer Report is much more “out of the box”, for homes with a similar construction type, condition, and size.

The Home Buyer Report includes the following:

Traffic Light System of Defects – A traffic light coding system uses green, amber, and red to describe the urgency in which a problem needs to be addressed.
General property information describing the current condition of the property and highlighting any areas to be concerned about.
Reinstatement costs – A Home Buyer Report, if requested, can provide accurate valuation and rebuild costs to be provided to legal advisors and financial lenders.
General repairs advice highlighting the main defects that could affect the value of the property.

A Building Survey also includes the following:

Detailed research – Prior to the building inspection, detailed research will be carried out to find out more about the land, location, and property history.
Detailed advice – A Building Survey will highlight issues and concerns in the building, and also provide professional advice about the time and cost of repairing the urgent defects. In addition to this, a building survey will outline the cause of any issues so you can address these also.
Tailored reporting – The opportunity to discuss concerns regarding the building and tailor the inspection and report to these.

What are the Benefits of a Building Survey?

A Building Survey provides a detailed report with expert opinions that can be used to guide your decision as to whether or not a property is considered a good or bad investment. A Building Survey is often considered an investment within the property industry and can help you avoid costly issues you may not have been able to foresee.

The Building Survey gives you a detailed evaluation of problems and is entirely in your best interests upon deciding to purchase a commercial or residential property. The benefits of a Building Survey include:

Actionable Insights – Building Surveys don’t just highlight problems, they provide solutions too. With professional opinions and advice, a building survey investigates each issue to find the cause of the problem and provide you with options for repairing and preventing it from happening again.
Budgeting – A Building Survey gives you the opportunity to budget towards the repair costs needed to fix and maintain the building.
Negotiation – With the results of a Building Survey you can negotiate the price with the seller to factor in the condition of the property and the repair costs you will need to consider.
Extremely detailed – A Building Survey looks at more than just obvious defects that can be seen on the surface. The Building Survey digs deeper and examines under flooring, between walls and on the roof. A building surveyor may also use various tools to help determine any issues that cannot be seen by the naked eye, whereas other surveys simply report on noticeable and obvious defects.

A Building Survey is also extremely valuable to sellers that need to know the steps they should take prior to selling a property. Those investing in a Building Survey report will receive factual information, advice, and priorities outlining which parts of the building need addressing, the potential costs, and time needed. This information allows the sellers to address these issues before putting the property on the market and will considerably increase the value of the property once resolved.

Building Surveys are particularly common for commercial premises such as industrial units, retail spaces, and office buildings.

Building Survey Process with Perry Hill Chartered Surveyors

When you contact one of our RICS Chartered Surveyors we will discuss with you any information you can provide to us about the property, and find out more about why you would like to obtain a Building Survey. This information will guide us through the process and allow us to provide closely tailored advice and recommendations throughout our inspection and within the detailed report that will be delivered to you within 10 working days of the property inspection.

On the inspection day, we will arrive at the property at an agreed time and will begin to inspect the property room to room. We will have with us the equipment needed to enter roof spaces and outbuilding, as well as camera equipment to take photos of the roof, and will spend a few hours carrying out the Building Survey.

After this stage, we will compile our findings into an extensive document that comments and advises on the best way to approach any property defects found during the inspection, together with photographic evidence. We break down the key actions that need to be fixed both externally and internally, with a budget to fix the issues so that you can see how much the work is likely to cost.

Once you have received your property report, we will be happy to discuss the report in detail with you to ensure that you understand everything completely. If you have any questions at all or would like to seek further advice, we will be happy to help.

Contacting Perry Hill Chartered Surveyors

There are differences between Home Buyer Reports and Building Surveys, but it is important that you seek trustworthy guidance as to the survey your property would be better suited towards. Our helpful team of RICS surveyors will give you the advice you need about the different property surveys and help guide you in the right direction.

Perry Hill Chartered Surveyors provide property inspection services throughout London and the wider South-East region. Our clients range from both commercial and residential and recognise the quality and attention to detail covered in both our property survey reports and customer service.

Please find more information about Building Surveys at our dedicated Building Survey Reports page, or Contact Us to speak to a member of our team.

Planning building work on your property? Get a pre-building Schedule of Condition report first

Posted on August 20, 2019 by admin

When carrying out construction work on your property, there’s always a risk of damage to a neighbour’s property – especially in terraced and semi-detached properties. To help reduce liability and scope for neighbour disputes, it’s well worth investing in a pre-building Schedule of Condition report before work starts.

What is a Schedule of Condition?

The Schedule of Condition is essentially a building survey, but one designed to record the condition and defects of an adjoining property. It’s a forensically detailed report (including photographs) itemising the full condition of the neighbouring property pre-works.

Why document the condition of your neighbour’s property? Because it reduces your risk in the long term. For example, if your neighbour files a claim for damages resulting from your building works, you’ll have a complete, independent record of their property’s condition before work started, and this will help to determine whether their claim has any grounds.

What sort of construction work are we talking about?

At Perry Hill, we recommend getting a Schedule of Condition report in advance of any building project that might impact neighbouring properties. This may include a rear extension, structural alterations, loft conversion or basement conversion. The report can be used for both residential and commercial properties.

Investing in peace of mind

Construction work can be stressful and disruptive. If there’s one thing you don’t need on top of that upheaval, it’s a dispute with the people next door. For you and your neighbour, the Schedule of Condition report provides important reassurance, because both parties know there’s a factual record of the adjoining property’s condition before work started.

Then, when the construction work is finished, a further inspection can be carried out, checking off against the Schedule of Condition report and confirming whether any damage or issues have arisen as a result of the works. It’s a sensible way to maintain good neighbour relations before, during and after a building project.

To find out how a pre-building Schedule of Condition can help ensure your construction work is a success, talk to Perry Hill. Our team of chartered surveyors can carry out all kinds of building inspections and reports, and provide trusted advice on the best way forward for your property.

Why You Should Get a Pre-Building Schedule of Condition Report Before Commencing Building Work

Posted on August 20, 2019 by admin

What is a Schedule of Condition?

Why document the condition of your neighbour’s property?

Because it reduces your risk in the long term. For example, if your neighbour files a claim for damages resulting from your building works, you’ll have a complete, independent record of their property’s condition before work started, and this will help to determine whether their claim has any grounds.

What sort of construction work are we talking about?

Investing in peace of mind

Why would a landlord issue a Schedule of Dilapidations?

Posted on July 18, 2019 by admin

It’s typical for a lease to set out certain obligations for the tenant in terms of keeping the property in a good state of repair. When a tenant is in breach of these requirements – perhaps by neglecting maintenance or misusing the property in some way – the landlord may issue a Schedule of Dilapidations.

What does the Schedule of Dilapidations cover?

In simple terms, the Schedule of Dilapidations is a document stating that the tenant has failed or is failing to repair/maintain the building. It will usually set out items of disrepair and what needs to be fixed; however, some Schedules of Dilapidations are more detailed than others, depending on whether they’re issued during the lease (known as an Interim Schedule of Dilapidations) near the end of the lease (Terminal Schedule of Dilapidations) or after the lease has expired (Final Schedule of Dilapidations).

A proactive approach to maintenance issues

As a landlord, why would you go to the trouble of issuing a Schedule of Dilapidations? The benefits are clear:

Maintenance issues can be flagged and addressed early, instead of letting problems get worse.
The Schedule of Dilapidations requires the tenant to take action, thereby providing a clear, legal way forward.
It reduces the risk of financial loss and helps to protect the value of your investment – remember, the cost of issuing a Schedule of Dilapidations may be a fraction of the cost of repairs or lost rental income further down the line.
If the tenant doesn’t fulfil their obligations, you have a paper trail to support a claim for damages.

It’s worth noting that the Schedule of Dilapidations benefits the tenant, too:

They have an itemised list of what work is needed, and in the event of a dispute, the Schedule serves as a useful starting point for negotiations.
The tenant can get on top of maintenance issues before they become major, expensive problems. No one wants a big, unexpected repair bill at the end of their tenancy!

At Perry Hill Chartered Surveyors, we work with both landlords and tenants to resolve dilapidations claims, and provide support with all aspects of dilapidations – from conducting inspections to issuing the paperwork. Let us help you navigate this potentially difficult process with confidence.

What is a Home Buyer Report – and is it right for you?

Posted on June 4, 2019 by dev@perryhill

If you’re buying a house or flat, you might be thinking of getting a Home Buyer Report. This inspection report looks at the property’s structure and overall condition, highlighting whether there are any major problems with the property.

The Home Buyer Report tends to be the preferred inspection report for UK buyers, but it’s not the only option. Here’s what you need to consider.

Remember, it’s not a full building survey

Many buyers think the Home Buyer Report is a formal structural survey, when it’s not. A Home Buyer Report gives an overview of the property’s condition, and is designed to flag urgent, visible issues that may affect its value. But it doesn’t look beyond what’s immediately visible. For example, the surveyor wouldn’t lift carpets or look at wiring.

The Home Buyer Report is therefore a sensible choice for conventional, fairly new properties in reasonable condition. For other properties, the Home Buyer Report may not be detailed enough.

How does a building survey differ?

A building survey (also known as a Full Structural Survey) is the most detailed type of property inspection you can choose. Not only does it cover the visible issues that are included in the Home Buyer Report, it also looks for issues that may not be immediately visible, such as woodworm in structural timbers. It also details the apparent cause of problems, how urgent they are, how they should be fixed, and how much it might cost. This information is incredibly valuable for buyers – particularly when it comes to negotiating a reduced price.

As an example, we recently carried out a building survey that found £80,000 of work was needed – a huge cost, and one that the buyer hadn’t factored into their budget. Armed with this advice, they were able to renegotiate with the seller.

Doesn’t a building survey cost more?

In a word, yes. Building survey costs vary according to the property, so each case is different, but in terms of value for money, we think the building survey wins hands down. As the previous example shows, it can save you a fortune in the long run.

At Perry Hill Chartered Surveyors, we’ll discuss your goals before the inspection, so that we can provide the information you need. Say, for example, you want to extend the property in future, we can tailor the report to include this and highlight potential issues. This way, we make sure you get maximum value for money.

Bottom line: a building survey is a worthwhile investment. Get the advice you need to make an informed purchase decision.

Lease Valuation Methods and Examples

Posted on February 14, 2019 by dev@perryhill

The market for acquiring short lease flats has always been strong, with investors and developers seeking to acquire short leaseholds, to refurbish and to obtain a lease extension. In this blog we look at the methods of valuing a short lease, in respect of obtaining a statutory lease extension.

Lease Valuation Method for Properties

The main accepted method of calculating the existing Leasehold value of a particular property, with less than 80 years unexpired lease term, is to utilise the Graphs of Relativity. However, this is not always appropriate valuing short leases, when they get to sub 30 years.

In cases where a lease term is sub 30 years unexpired, other methods of valuations should be considered. Using an investment calculation would be appropriate in ascertaining an existing lease value in our opinion.

There would be no need for any further allowance for the “no act” world which you would have to consider when using a graph of relativity to calculate the existing Lease value. The statutory assumption to be adopted when valuing the existing lease value is to assume that the property does not have any rights under the act for a statutory lease extension.

For unexpired Lease – “short leases” of say 20/30 years unexpired threshold, the valuation method should consider what a prudent investor be willing to pay to acquire the Lease taking into account that at the end of the term the Leasehold property would revert back to the Freeholder. A valuer would first have to access how much the property would be let out for on the open market, per annum, minus the relevant deductions associated with properties that are let out on an Assured Shorthold Tenancy. Once this has been assessed an appropriate yield would need to be applied. The yield would represent the appropriate rate of return an investor could expect from a property, knowing that it is effectively a wasting asset.

Leasehold Valuation Calculation

We have outlined a leasehold valuation calculation example below; please note the figures used are purely subjective.

A two-bedroom, ground floor flat rents for £1350.00 per calendar month (£16,200 per annum). Unexpired term is 17 years.

Calculation

£16,200 per annum

Less

Ground rent @ £15.00 per annum

Management costs @ 10% of annual rent (£1620.00)

Void period @ 5% of annual rent (£810.00)

Total = £13,755 per annum

Capital Value

£13,755 @ Yield (8%) for 17 years (9.1216 YP) = £125,468.00

Typically, a residential investment would attract a yield of 3-5%, given the inherent capital value associated with residential investments. However, as this asset has a declining value because it is a leasehold wasting asset, an investor may expect a return of 7-8% on sums invested reflecting the capitalised short lease value.

This is an appropriate method of valuation for residential short Leases, as the methodology represents a tried and tested approach for calculating the value of investments across a multitude of different disciplines. The Upper Tribunal has stated that the Graphs of Relativity should only be used when there is a lack of real-world evidence. This method would be considered as real-world evidence, as it is based upon transactions that have been completed. There may be different attitudes to yield and deductions applied to the calculation depending on the location, lease and type of the property.

Lease Valuation Advice from Perry Hill

Our valuers are specialists in appraising Leases and Leasehold premises, in order to provide Clients with realistic assessments, in respect of the premium payable in lieu of Statutory Lease Extensions.

Get in touch with one of our team members today by filling out our contact form. One of our trusty agents will then get back to you.

Why extend your residential lease sooner rather than later?

Posted on February 13, 2019 by dev@perryhill

If you own a leasehold flat, when was the last time you thought about the length of your lease? Many leaseholders don’t think twice about their lease until they come to sell the property – at which point, they may find that a short lease makes it harder to sell or achieve the price they want. The solution is to extend the lease sooner, rather than wait until you’re trying to sell.

Six reasons to be proactive and extend your lease now

When the time comes to sell, if you’ve already extended the lease, you’ll be ready to put the property on the market straight away. No fuss, no waiting.
A flat with a longer lease – the longer the better – is much easier to sell. Buyers don’t want the hassle of having to extend the lease themselves within a few years of buying the place. Most will simply look elsewhere and choose a property with an extended lease.
The majority of high street mortgage lenders won’t lend on a property that has an unexpired lease of 75 years or less. So if you’re thinking of re-mortgaging or looking ahead to a future sale, a short lease may limit your options.
Properties with leases of less than 80 years depreciate faster than longer-lease properties. Extending now is a smart way to protect your investment.
If you’ve owned the leasehold for two years or more, and meet other qualifying criteria, you may be able to extend your lease for an additional 90 years, on top of the remaining lease term. So if your lease has 80 years left, and you extend for an additional 90 years, that’s a new lease of 170 years – making your property more valuable and easier to sell in the future.
Finally, it’s far cheaper to extend a residential lease at 81 years or above. If you wait until the lease drops below that, it’ll cost you more. Is it worth putting it off and paying more in the long run?

When you work with a residential expert, extending your lease isn’t as complicated as you might think. At Perry Hill Chartered Surveyors, we’ve helped many homeowners across Guildford, Surrey and London successfully extend their leases – and have fine-tuned the process to be as quick, painless and affordable as possible. Talk to us today about extending your residential lease.