Dilapidations is a legal term meaning disrepair found within a leasehold premises, contrary to the repairing and redecorating covenants contained within the lease.
Disrepair can range from relatively minor defects in internal finishes and decorative surfaces to major external and structural defects such as failed roofs, structural cracking and unstable structure
Disrepair can also include failure to comply with statutory requirements such as the obligation on those in control of commercial premises to carry out Fire Risk Assessments or Electrical tests and just as importantly, act on any significant findings
A Schedule of Dilapidations is a document, usually prepared by a Chartered Building Surveyor in support of a claim for damages at the end of a lease.
Schedules of Dilapidations fall into three broad types:
- Interim schedules are served during the currency of the lease, the purpose of which is to set out essential remedial work which the tenant should carry out in order to comply with lease covenants.
- Terminal Schedules are served in the last year of the lease term and also typically include requirements for removal of Tenants trade fixtures and fittings and redecoration
- Final Schedules are served immediately after the end of the lease and which might be developed from a Terminal Schedule served earlier.
The preparation and serving of Terminal or Final Schedules of Dilapidations is subject to the Property Litigation Association Dilapidations Protocol and the RICS Guidance Note. The Protocol sets out recommended response times, standardisation of procedure, encourages reasonableness by all parties, requires that the Schedule must be endorsed by the Building Surveyor who prepared it together with a statement of intentions of the landlord.
The guiding principle of the Protocol is to encourage the parties to resolve disputes without recourse to litigation.
A Final Schedule should be accompanied by a claim letter which will include the Landlord’s and Tenant’s names and addresses, a summary of the facts relating to the claim, a list of documents relied upon, confirmation that the Landlord or their advisors will attend meetings and a date by which the Tenant’s response is required and finally a summary of the claim.
The parties to a claim need to be aware that any claim for damages for breach of covenant at the end of the term is limited under Section 18(1) of the Landlord and Tenant Act in two main ways.
That damages for breach of covenant shall not exceed the value by which the landlords reversionary interest is diminished as a result and that;
No damages shall be recovered when the premises are to be pulled down at the end of the lease or shortly after, or where major physical alterations will be made which would render any repairs valueless.
Once a landlord has instructed a Building Surveyor to prepare a Schedule of Dilapidations, the process generally progresses as follows
- Appraisal of the documents – which will typically include leases, licences to alter, schedules of condition, side letters, plans and specifications and deeds of variation.
- The Inspection – the Building Surveyor will identify items in disrepair, consider whether this disrepair has arisen during the course of the lease and then determine the appropriate remedial works. The Building Surveyor also quantify the repair in most cases.
- Preparation of the Schedule – The Building Surveyor will prepare the Schedule ready for service upon the Tenant, usually via solicitors.
- The Response – Generally a period of 56 days is considered a reasonable period to provide a response. Typically the Tenant’s appointed Building Surveyor will contact the Surveyor who prepared the Schedule and obtain an electronic copy of the document
The parties are generally encouraged to meet before the response is submitted and in any event meet shortly thereafter in order to resolve any queries or areas of disagreement.
It is vitally important that before embarking on a new lease a prospective tenant is fully aware of all the circumstances surrounding the premises under consideration and in particular it’s physical condition. Commercial premises are rarely in full repair and unless action is taken to guard the tenants interest any pre existing defects may well become part of the repairing obligation.
Learn how to avoid this by commissioning an Acquisition Survey.
Or, have your questions answered with our section for Dilapidations FAQs.
