- What are Dilapidations?
What are Dilapidations?
Dilapidations refer to the legal and financial obligations that a tenant may have towards the maintenance and repair of a leased property during the tenancy and upon its termination. These obligations are typically outlined in the lease agreement between the landlord and the tenant.
It is important for landlords to ensure that a property is kept in a good state of repair for any future tenant so if a tenant fails to comply with any terms of the lease, the landlord can instruct a building surveyor to prepare a Schedule of Dilapidations. This will document any breaches and appropriate remedies for these breaches, along with any associated costs and may include details about both the interior and exterior, depending on the property and lease.
In most cases, the costs for preparation and service of the schedule are recoverable from the tenant, subject to the relevant lease clause.
What governs Dilapidations?
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Common Law: This draws from judge-led decisions in Civil Courts predominantly in Contract Law but also in Tort. There is a vast amount of case Law in relation to leasehold property matters.
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Statute:
- Landlord and Tenant Act 1927, Section 18(1), limbs 1 & 2.
- Law of Property Act 1925, Sections 146 & 147.
- Leasehold Property (Repairs) Act 1938.
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Dilapidations Protocol: This was introduced in January 2012 to encourage transparent pre-litigation correspondence between the parties, i.e. Landlord and Tenant. It sets out timeframes for serving and responding to notices and notes what to include, not include in a claim with emphasis on them being accurate and honest.
Lease Covenants
All commercial lease agreements contain covenants which are rules on what can and cannot be done on the land or property. These can include repair, redecoration, reinstatement and statutory compliance requirements.
Tenants' Responsibilities
Tenants are usually responsible for keeping the property in a ‘good state of repair’ during and at the end of their lease term. This will include remedying any damage that occurs during their occupation and complying with all lease covenants.
Interim Inspections
Landlords may instruct an interim inspection during the lease term and issue an Interim Schedules of Dilapidation. Usually this is done if they believe the tenant is not upkeeping the property to the correct standard. They can be produced and served on a tenant at any time from commencement of their lease, but are typically served up to two years from lease expiry.
Terminal Dilapidations
At the end of a lease term, the landlord can instruct a final inspection of the property. A Terminal Schedule of Dilapidations is commonly served within the last 12 months of a lease term and will include all items which need to be carried out by the tenant to comply with their lease obligations such as repair, decoration, reinstatement and statutory compliance items.
Settlement or Negotiation?
Once a terminal claim is issued, the landlord and tenant can enter negotiations to settle upon an agreement. They may instruct surveyors to act on their behalf so an agreement can be reached swiftly between all parties.
Financial Implications
Dilapidations can have significant financial implications for tenants should they fail to comply with their lease obligations. They may be required to pay for costs of repairs and redecoration or any compensation should they fail to meet them. It is therefore important that all parties fully understand these obligations prior to any lease agreement being undertaken.
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