Dilapidations
In commercial property law, ‘dilapidations’ refers to breaches of lease covenants relating to matters such as the condition of a property and statutory requirements. It then deals with the remedying of those breaches.
Commercial leases typically require the tenant to keep premises in repair; if they do not, the law of dilapidations applies and they will be required to either bring them into repair or pay the cost of doing so to the Landlord.
Landlords are at liberty to serve a schedule of dilapidations on a tenant either during (interim schedule) or more commonly at the end of a lease (terminal schedule). This itemises the breaches of covenant, refers to the relevant lease clause and identifies the remedy.
Remedies for the landlord will be for the tenant to undertake the specified works or actions or recover from the tenant the cost of remedying the breach. The schedule is typically prepared by a Chartered Surveyor.
Disputes often arise between landlords and tenants and they will typically instruct surveyors to negotiate the claim, hopefully to settlement.
Most dilapidations claims are settled by negotiation. Other methods exist in demonstrating loss suffered by a landlord such as diminution valuations.
Formal guidance on dilapidations such as the Property Litigation Association (PLA) protocol was adopted under the Civil Procedure Rules in 2012.
The RICS produces a guidance note on dealing with dilapidations claims, currently in its seventh edition. The Financial Reporting Council’s accounting standards also require occupiers to budget for dilapidations in their accounts leading to more tenants seeking professional advice on dilapidations before expiry of their leases.
At GT Louis, we are well versed in handling dilapidations claims and advising both landlords and tenants of their rights and the merits of any claim. We also provide advice before both parties enter into the formal lease agreement to ensure that the risks of any pitfalls relating to dilapidations are mitigated at an early stage.