D for Dilapidations

D is for Dilapidations #PropertyAtoZ

D is for Dilapidations, meaning the breaches of a tenant’s lease covenants when it comes to repairs, reinstatement of alterations, redecoration and compliance matters. In a nutshell: the tenant not leaving a property in the condition they have agreed to in their contract (the lease).

Any claim for damages is capped at the Diminution in Value of the landlord’s reversionary interest under s18 of the Landlord and Tenant Act 1927 in respect of repair. Common law covers claims for reinstatement and redecoration.

But what exactly are dilapidations? Who is responsible for putting things right, who pays the bill and where can you go for help?

At Trinity Rose, we have years of experience dealing with dilapidations claims and helping both landlords and tenants. We can help guide you as you navigate disputes and consider your position.

Let’s start by understanding a bit more about property dilapidations…

What are property dilapidations?

The term ‘dilapidations’ incorporates many things that essentially mean the tenant is not leaving the property in the condition they have agreed to in their contract. It will cost money and time to restore the property to its agreed condition and the landlord may insist the tenant completes works, or alternatively a monetary claim is made against the tenant in lieu of undertaking works, to recover the costs which relate to the landlord’s losses in putting matters right.

Dilapidations can relate to many of the tenant’s obligations written in the lease; typically claims include matters of redecorating, repairs to the building structure and fabric, reinstatement of alterations carried out by the tenant during the lease term, or matters of statutory compliance.

What is a dilapidations survey and when do I need it?

A dilapidations survey is a detailed assessment to establish the current condition of a property against the provisions of the lease and associated documentation. This survey is usually carried out towards the end of the tenancy and can be compared where applicable with the schedule of condition (from the beginning of the tenancy) to determine any dilapidations liabilities of the tenant.

What is a “Yield Up” clause and does it affect dilapidations liability?

Yielding up is a standard phrase in many lease assessments and basically means that the landlord expects the tenant to return the property in a specific condition. Dilapidations are a tenant’s failure to comply with their lease regarding the condition of the property. If they fail to ‘yield up’, this will be detailed in dilapidations.

What is a schedule of dilapidations?

This outlines the works needed/costs involved to restore the property to a certain state/condition. As your local dilapidations surveyors, we can put together a schedule of dilapidations on your behalf if you are a landlord, or review a claim put to you if you are the tenant of a property.

When should a schedule of dilapidations be served? /When are claims made?

Usually, schedules of dilapidations are served towards the end of the tenancy. However, interim claims can be made to require the tenant to act during the course of the lease, to ensure they meet their obligations. It is important that such claims, when made by a landlord, are appropriately timed and mindful of the structure and mechanics of the lease to ensure they are enforceable.

Terminal claims are often prepared before the end of the lease to enable the tenant to act upon the landlord’s schedule in readiness for the lease ending.  However, it is assumed the tenant is aware of their obligations and there is no requirement for the landlord to claim until the lease comes to term.

How much do dilapidations cost?

The landlord can claim the cost of any works needed to restore the property to the condition in which it should have been left. e.g. repainting areas that the lease determines require such action; the cost of rebuilding a wall the tenant removed during the lease term, or the costs of repairs due to an act or omission on the part of the tenant.

In addition, there are often valid claims for failure on the tenant’s part, to comply with its statutory obligations i.e. Gas Safety, Electrical Safety, and testing of equipment/installations belonging to the landlord.

The claim can include surveyor’s and solicitor’s fees for preparing and issuing the schedule of dilapidations; surveyor’s fees for the procurement and management of the dilapidations works and, if applicable, VAT.

In certain circumstances, if the tenant fails to fulfil its obligations by term end and the landlord has a prospective tenant ready to occupy the building immediately afterwards, the landlord may be entitled to other ‘Heads of Claim’ relating to loss of rent and other payments it may be entitled to under a new lease, during the time it takes for works to be completed.

What if the premises are in a poor state from the start?

In some cases a tenant’s dilapidations liability can be limited by incorporating a Schedule of Condition (a record of the property’s condition prior to the commencement of the lease).

However, the tenant’s obligations will be clearly stated in the lease and is it the wording of the tenant’s obligation clauses that ultimately dictates the standard of work to be carried out.

What is supersession in dilapidations?

This is when a landlord may not claim for a tenant to remedy a breach of their contract, because they plan to do something with the building which makes those remedies redundant. E.g. the landlord would not be able to claim for works if they plan to demolish or substantially develop the building anyway.

Who is responsible for dilapidations?

Dilapidations claims are usually prepared on behalf of a landlord to be served against a tenant. If things are not set right before the end of the lease, the landlord may have a valid claim for damages against the tenant. Essentially, dilapidations claims relate to breaches of contract, and are therefore civil claims in law.

What is the Dilapidations Protocol?

Dilapidations Protocol (short for Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy), ensures proper procedures are followed regarding recording/reporting/disputing dilapidations, in order for claims to be fair.

Does the landlord need to follow a procedure to serve a schedule of dilapidations?

According to Dilapidations Protocol a landlord should instruct a surveyor to inspect their property then draw up the schedule of dilapidations. This will then be served to the tenant via a solicitor. These steps help claims to run more smoothly in court should the tenant and landlord have a dispute.

Technically, landlords have six years from the end of a lease to make a claim. However, sooner is better and within 56 days of the end of the lease is used as a general rule.

What is section 18 and how does it affect dilapidations?

Section 18 refers to a specialist valuation relating to the damages incurred due to the tenant not fulfilling their obligations.

If a tenant does not fully repair/reinstate the property in line with their contract, Section 18 limits the landlord’s claims for damages whereby the landlord’s loss is ‘capped’ by the effect on the value the dilapidations works will have to the property.

This is a specialist field f valuation and can significantly increase the costs of defending a claim to both a landlord and a tenant.

Are landlords entitled to claim for loss of rent?

Technically, a landlord can claim for loss of rent for the time it takes to repair dilapidations due to a tenant’s breach of contract. It can be very difficult to make a successful claim, however, as there needs to be proof that the lanlord’s inability to re-let is not due to another reason. The landlord’s claim may also be limited by the Section 18 cap.

How can a tenant avoid a dilapidations claim?

The tenant should read the lease before signing, to fully understand their responsibilities. They should then take action during their tenancy to carry out any necessary repairs to meet their obligations.

Do tenants have to accept the landlord’s dilapidations claim in full?

No. The tenants should have their own survey completed and are within their rights to dispute the landlord’s claim. They should seek legal advice if they wish to do this. 

How can a dilapidations surveyor help?

We work closely with both landlords and tenants when it comes to dilapidations. We have years of experience and draw upon expert knowledge to assist with schedules of dilapidation, lease analysis and property inspections.

We can also assist with the preparation of dilapidations provisioning reports, which can assist a tenant of a commercial property with a full assessment of the financial quantum of its likely dilapidations liability, so that provisions can be put into company accounts. Such reports are normally only accepted when supported by a detailed analysis and report prepared by a Chartered Surveyor.

Find out more

Whether you are a landlord looking to make a claim or a tenant aiming to challenge a schedule of dilapidations, or make a suitable accounting provision in respect of your liability for dilapidations, our team of RICS Regulated Chartered Surveyors are here to help. Click here to find out more about our dilapidations services.

Alternatively, please pop into the Trinity Rose office or give us a call. Our friendly team will be happy to answer all your questions.

#PropertyAtoZ #propertyglossary #dilapidations