Marquis House, Jermyn Street, London SW1

When Drivers Jonas were appointed to manage Marquis House, 67/68 Jermyn Street London SW1 on 1 March 2006, the Trustees of Rockspring Hanover Property Unit Trust (RHUT) held the residue of an 80 year long leasehold interest from the Crown Estate that was due to expire in July 2007. The property comprised a period seven storey office and retail property with a Portland stone façade of some 9,962 sq ft.

RHPUT had sublet the building to 11 tenants, whilst one small office suite was vacant. The building was producing a profit rental income of circa £340k pa.

The building was of basic specification, non air conditioned with a single lift and had originally been scheduled to form part of a larger redevelopment plan by the Crown Estate. As this plan had now been postponed until at least 2012, the potential dilapidations liability was a serious concern particularly as the previous managing agents had taken no steps to mitigate RHPUT’s liability.

Drivers Jonas prepared a business plan and strategy for the building to include:

• Approaching the freeholders to either extend the head lease for a premium or alternatively to effect an early surrender to enable the freeholders to negotiate leases direct with RHPUT’s subtenants, most of whom did not have security of tenure.
• Pursuing the freeholders to serve a full terminal Schedule of Dilapidations on a unit by unit basis to enable this to then be issued to each sub tenant.
• Implement the repair and redecoration of the common parts and exterior pending receipt of the delayed schedule from the Crown Estate surveyors and more importantly, to recover the full cost via the service charge.
• To effect a seamless handover to the new managing agents on the expiry of the RHPUT head leasehold.

Result: The repair and redecoration of the common parts and exterior was implemented and completed by May 2007. Although this resulted in the service charge increasing from £60k to £320k pa most of the costs were recovered before the contractors needed to be paid.

The cost of the landlords priced schedule was circa £400k. Through negotiation, the freeholders surveyors agreed that some major works could be omitted, such as the cleaning of the Portland stone façade with significant cost savings.
As many of the sub tenants decided to renew their leases direct with the freeholders, despite the massive increase in their service charge levels, many of the internal office and retail dilapidation and reinstatement works were deferred and thus RHPUT were relieved of liability.

The final position was:

• A saving of circa £50k on the overall cost of the works.
• The full cost of the external and internal common part repairs and decoration works being fully recovered from the sub tenants via the service charge (other than the one void unit and one sub tenant who benefited from a capped service charge).
• The final dilapidations liability of RHPUT was £30k as compared to the original claim in excess of £400k. This small liability only arose because of the void and the capped service charge, otherwise the final liability would have been nil (apart from fees).
• If Drivers Jonas had not acted swiftly to arrange for the circa £250k of works that related to the common parts and exterior to be implemented before the expiry of the head lease, it would not have been possible to recharge the cost to the sub tenants via the service charge.
• The major works were implemented within a 15 month window between March 2006 and June 2007.
• This demonstrates the close coordination of services between the Drivers Jonas asset managers and building surveyors.
• A satisfactory outcome for all parties.