schedules of dilapidations

What is Dilapidations?

Dilapidations relate to disrepair of buildings and land commonly where a landlord or a tenant has an obligation to repair.

The landlord normally seeks to enforce a tenants repairing obligations.  The reverse is possible, e.g. when a tenant in part of a building seeks to enforce the landlordís obligation to repair the building as a whole.

Claims may include the cost of repairs, reinstatement of alterations, professional fees and loss of rent.

State and case law have modified the strict wording of repairing covenants and leases so valuation and law affect the process.

What is the Procedure?

A schedule may be served at the end of a lease or during the lease term.  A landlord instructs a surveyor to inspect the property and prepare a schedule.  This includes items of disrepair, remedial work required, the clause in the lease which applies to each item and the estimated cost of repair. 

Additionally, the schedule may include items such as professional fees and loss of rent incurred during the period when repairs are being dealt with.

Landlords Objectives

During the lease term, the landlord may serve a schedule simply to ensure that the property is adequately repaired and maintained.

The landlord may wish to enter the premises to carry out repairs at the tenantís expense.

The landlord may be seeking forfeiture of the lease on the ground that the tenant has not complied with the repairing covenants.

The landlord may use a schedule as a lever in other negotiations with the tenant which are not related to repair.

At the end of the lease the landlord may seek a cash settlement.

The tenant may decide to carry out repairs prior to the end of the lease to control the method of repair and costs, but also to avoid any claim for consequential damages such as loss of rent.

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Types of Schedules of Dilapidations

Interim schedule Ė made during the lease term, usually prior to the final three years.
Terminal schedule Ė made during the last three years of the term.
Final schedule Ė after expiry of the term.  This schedule would normally be costed.

Limitations on Dilapidations

Under the Leasehold Property (Repairs) Act 1938, a tenant may claim protection against certain dilapidations claims provided that more than three years of the lease remain unexpired and a counter notice is served within 28 days of service at the landlordís notice. 

The Act protects the tenant against forfeiture without the leave of the court.  It also limits the repairs that can be enforced to those which are required to maintain the value of the landlord's reversion and those which are a statutory requirement.

The cost of works is not the only measure of damages.  The overall loss to the landlord will be the depreciation in the value of the property brought about by the disrepair.  This is often less than the cost of works. 

If the landlord intends to demolish the building and redevelop, then there is no loss.  Similarly, if the landlord intends to strip out and refurbish the building, then there is no loss or a reduced loss.

Preparation

Prior to inspecting the property the landlordís surveyor should carefully read the lease to fully ascertain the landlordís and tenantís repairing obligations.  The property is inspected in the light of this information and, in some cases, tests of services are carried out.

Costs

Most leases provide for costs of preparing a Schedule of Dilapidations and the service of notices to be borne by the tenant.

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Negotiations

The surveyors acting for the landlord and tenant often meet at the property and go through the schedule clause by clause, agreeing what should be included, what should be deleted and what costs are applicable.

Failing a negotiated settlement, the matter may be dealt with by the courts, by arbitration or by an alternative dispute resolution system.  The method of resolution may be laid down in the lease or may be agreed between the parties.

Settlement Terms

The surveyors agree how the matter is to be settled.  This is normally either a schedule of agreed works for the tenant to complete or the sum of a cash settlement.  It is important that settlement terms are agreed in writing before any works are completed or any payment made.

James Flynn Chartered Surveyors?

We are an independent firm of chartered surveyors and have been advising clients on all aspects of property value and condition since 1980 from our offices in London, Surrey, Hampshire, Sussex and Kent.  We mainly cover the London and South East region but travel further afield when this is requested.

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