Have you ever been caught up in worrying and unforeseen dilapidations discussions when your tenancy agreement comes to an end? Paul Raeburn, Chartered Surveyor and managing director at Dilapsolutions, a specialist dilapidations consultancy, says you needn’t be so worried if you know your law. He discusses how tenants can win the dilapidations battle with what might seem all-too-powerful landlords.

First of all, let’s put into context what we’re discussing, without going into all the gory and dull detail.

Dilapidations: the simple explanation is that leases are contracts which place commonly underestimated and massive obligations upon tenants, particularly to repair and redecorate, as well as reinstate all alterations to the leased property. In reality, to return the rental property in better condition than it was at the start of the lease.

Breaches of these obligations often only come to light at lease end when the landlord has a building surveyor inspect and prepare - and a solicitor serves – Terminal Schedule of Dilapidations. This is the landlord’s contractual entitlement in terms of damages for any alleged breaches. They can run to hundreds of thousands of pounds and in many cases even more. Whatever the sum claimed, it very often comes as a massive shock and is unaffordable without jeopardising the business, or even risking personal bankruptcy.

It’s a position no tenant wishes to find itself in.

Either via your own legal representation, or without, the common path is to instruct your own building surveyor to inspect and negotiate towards a lower sum for settlement.

However, it is at this critical stage that we’ve seen landlords threatening to, or even starting legal proceedings claiming damages. This leads the tenant to panic, so an inflated settlement figure is paid, as tenants fear an even greater financial penalty from the threatened Court action.

Yet, with the right advice, it doesn’t have to be this way. Firstly, there is a little known, but especially valid and potent piece of law which protects tenants. Know this and deploy it!

It requires using a second distinct discipline of surveyor (a valuer), to apply the so-called “diminution in value‘ or section 18, cap. This provides that the damages actually due to the landlord will be the lower of the Cost of Remedial Works negotiated between the building surveyors, OR the amount (if any) by which the breaches diminish the property’s open market value.

Let’s walk through that.

Usually, the ‘real terms’ effect on value is far less. Sadly, with so many vacated commercial and leisure properties, even if the premises owner simply and ONLY did all the remedial works claimed, it would still sit empty. That’s because there’s no market for it any more in that form.

Rather, it is now ripe for likely conversion to a new use often as residential, takeaway delivery, drive-thru coffee outlet, or convenience store. These conversion works will of course snuff out, or effectively ‘ruin’, many of the works being claimed against you in the first instance.

These specialist valuation arguments are applied to show that many (sometimes all) of the landlord’s claimed remedial works simply do not affect value in the open market, so can be used to significantly reduce the amount paid in dilapidations to the landlord. In extreme cases, there are occasions where Paul and his team have settled at NIL, if the valuer’s evidence is that demolition is going to be the most likely outcome. Think about it. Why would the landlord need hundreds of thousands of pounds to rectify a property if the likely outcome is to raze it to the ground?

This is important: The law is concerned with what the theoretical buyer at the end of your lease would have intended doing, and not what the actual landlord conveniently says it intends.

So, this is where the expertise and skill of that other type of chartered surveyor, the valuer, plays a golden part, working alongside the building surveyor.

As for the potency of a “threat” to issue legal proceedings, or even doing so, the reality is that fewer than one percent of dilapidations claims make it to trial these days. The Courts place ever greater pressure on disputing parties to instead mediate, a form of alternative dispute resolution which is far cheaper, less stressful and only lasts a day.

Dilapsolutions is a unique dilapidations consultancy employing valuers as well as building surveyors so as to ensure its clients are guaranteed the maximum defence to dilapidations claims, securing the minimum possible settlement sums. Paul and his team are highly seasoned experts tested in Court, mediation and most importantly, as attested to by their myriad of relieved and still solvent clients the country over.

Paul has more than 30 years’ experience as both a Chartered Surveyor and Chartered Arbitrator, as well as more than ten years as an RICS accredited mediator. To find out more visit www.dilapsolutions.com.