In the context of landlord and tenant law, the term ‘dilapidations’ is used to refer to the breach by a tenant of its repairing and/or reinstatement liabilities, which liabilities are set out in the written lease.
A tenant of commercial premises will usually covenant to keep the premises in the same state of repair, but not every lease is identical. Some repairing obligations will be more onerous than others. In addition to general repair, landlords will often give permission for a tenant to carry out alterations to the premises at the start of the lease, to suit the tenant’s business needs. However, licences to alter will very often be conditional upon the tenant promising to reinstate the premises to their original pre-altered state at the end of the tenancy.
A well-drafted lease and licence to alter will set out clearly the landlord’s expectations of their tenant in terms of repair and reinstatement. Although some leases anticipate that a landlord may demand repairs to be carried out during the term of the tenancy, commonly dilapidations are addressed towards the end of the lease, or when it is known that the tenant will be vacating.
Landlords are well advised to seek professional advice from a building surveyor when looking to pursue a dilapidations claim. The surveyor will inspect the premises and can prepare what is known as a schedule of dilapidations. The schedule will describe the items of disrepair and itemise the works required to be undertaken to put things right. The schedule will also consider any alterations or works carried out by the tenant, and what needs to be done to reinstate. For example, to remove a mezzanine floor installed by the tenant in an industrial unit, and to make good and damage caused to the flooring and walls as a result.
Dilapidations Pre-Action Protocol
The Dilapidations Pre-Action Protocol is a code of conduct which landlords and tenants of commercial premises are required to follow. The Protocol prescribes the information that a landlord must provide to their tenant / former tenant on the termination of the tenancy. The dilapidations schedule and quantified demand document will enable the tenant / former tenant to understand the precise nature of the landlord’s claim i.e. the nature of the repair and reinstatement required, and the anticipated level of cost and professional fees that the landlord or their surveyor anticipates will be incurred in putting the premises into the required state of repair and/or reinstated condition.
The Protocol invites the tenant to provide a response to the schedule and quantified demand within 56 days of receipt. A tenant is well advised to instruct their own buildings surveyor to advise them as soon as possible following receipt of the landlord’s schedule. The aim of the Protocol is to encourage early dialogue between the landlord and tenant or their respective advisors. Often dilapidations claims can be settled by agreement, which will result in the tenant paying the landlord a sum of money (known as damages) in lieu of carrying out the works themselves. In addition to paying damages, the tenant will be expected to reimburse the landlord their reasonable professional costs: the lease will usually contain a provision requiring the tenant to pay costs in the event that they are found to be in breach of their lease obligations.
If an agreement cannot be reached to dispose of the landlord’s claim, the landlord is required to quantify their loss and communicate that to the tenant. This can include getting quotes and inviting contractors to tender based upon a specification of works. The intention is to give the tenant/former tenant the opportunity to understand the level of claim and encourage further dialogue. The landlord’s ultimate recourse having complied with the Protocol is to issue a claim at Court.
Dilapidations disputes are capable of early resolution and settlement. However, very often a tenant will not have dilapidations in mind when they exit the lease. The monetary value of dilapidations claims will vary from property to property. It is not uncommon for claims to run into tens of thousands of pounds, and even into the millions.
Summary
I would encourage landlords and tenants to seek early professional advice, and to look to commence dialogue well in advance of the lease termination date, where possible. This will bring to the forefront of a tenant’s mind their obligations; it can enable repairs to be carried out by the tenant prior to their vacating; and this may reduce the period of time within which the property will be unavailable for re-let whilst works are being done. Any void periods needed for contractors to carry out works will enable a landlord to add a claim for loss of rent.
I have extensive experience in advising both landlords and tenants on bringing or responding to dilapidations claims, and work closely with surveyors throughout Devon, Somerset and wider afield. Should you require expert legal advice, please contact me on 01392 401176 or H.Williams@stephens-scown.co.uk