Dilapidations involves the assessment of breaches of lease covenants that relate to the condition of the property during the terms of the tenancy or when the lease ends.

They could be considered as the ‘exit costs' for a tenant at the end of a lease, and form the basis for an estimate of the costs involved to restore the property to its condition at the start of the lease. A ‘schedule of dilapidations' is served to the tenant by the landlord. It can often come as an unwelcome surprise and it's not uncommon for disputes to arise.

WHAT'S INCLUDED IN THE SCHEDULE OF DILAPIDATIONS?

The schedule of dilapidations is the legal document landlords can issue to make a dilapidation claim against a tenant. It includes the clauses that outline the tenant's obligations when it comes to the condition the property should be returned in and requests reinstatement of any alterations that have taken place during the term of the lease.

The schedule of dilapidations will also outline the work required to return the property, in accordance with the lease terms, to its original condition, as well as a figure for the cost of carrying out the work. It's not unusual for this figure to be equivalent to be a significant amount, which is why receiving a schedule of dilapidations can be such a nasty shock. However, it's worth bearing in mind that the figure quoted to complete the work may not reflect what it actually costs to settle the claim.

It is important to ask a Chartered Surveyor to review the lease documents, carry out a site inspection, and to then consider each item of the claim individually and establish:

• if the work required by the landlord was the tenant's responsibility under the terms of the lease, e.g. the landlord had asked the tenant to reinstate alterations which had clearly been in place prior to lease commencement;

• if the element was in worse condition than that anticipated by the lease, e.g. considering the age, character and location of the building the condition of the suspended ceiling was acceptable;

• whether the financial compensation requested by the landlord was realistic, e.g. the landlord had over valued some of the work required.

In addition, Section 18(1) of the Landlord and Tenant Act 1927 needs to be considered. This Act makes it compulsory for a landlord to consider their actual financial loss resulting from the tenant's breaches of covenant, e.g. the landlord's actual financial loss may be less than the cost of doing the work.

If a client is prepared to carry out some of the work in order to reduce the claim, the surveyor will be able to advise which remedial work would be the most cost effective and time beneficial which may result in a client doing some minor works or redecoration.

Richard advises that the process of protecting yourself against a dilapidation claim starts before the tenancy begins. The subtleties of the wording in your lease can have a significant impact on your liabilities, so make sure you take advice from your surveyor on the terms and conditions in your lease and request a detailed survey of the condition of the property at the start of the lease. Read the terms of the lease very carefully and be clear about what you're responsible for, it is recommended to seek legal advice at this stage if you're unsure.

Should you want to alter the property during your tenancy, get written permission from the landlord first and follow the procedures as set out in the lease. You should keep a detailed record of any alterations you make and take photographs where possible. Finally, be sure to maintain the building regularly during your occupation to reduce the need for repairs.

If you receive a Schedule of Dilapidations, you can either agree to the repairs detailed in the schedule and pay the compensation, agree to the repairs and carry them out yourselves or dispute it.

If you decide to dispute the claim, you should seek advice from a Chartered Building Surveyor that specialises in dilapidations. They will carry out a careful review of lease documentation, review the landlord's schedule and provide strategic advice on the process.

Kenyon Gough is a commercial building surveying practice, based in Manchester, providing a range of commercial building surveying services to clients locally and nationally.

https://www.kenyongough.co.uk/services/dilapidations-advice/index.html

Email: rk@kenyongough.co.uk

Mobile: 07917 077 592