What Are Dilapidations?

Put simply, dilapidations represent ‘exit costs’ for a tenant at the end of their lease. These costs are usually attributed to restoring the property to its original state or pre-let state, i.e., repairs or reinstating any aesthetic alterations. Related directly to commercial properties, dilapidation is a term that every landlord and tenant need to understand. As part of their tenant obligations, they must adhere to the required level stated in the lease; if they fail to do so, actions need to be taken in order to meet the outlined level.

The first time a tenant tends to hear the term dilapidations is when they receive a schedule of dilapidations from the landlord. 

A schedule of dilapidations is a legal document that a landlord must draw up before having the capability to make a formal claim against the tenant (also known as a dilapidation claim). The contents of this document will include all the clauses of the lease, which state tenant obligations in regards to the state or condition of the rented commercial property. Within this document, it will state the repair, decoration obligations, and any reinstatement of alterations carried out during the tenant’s term. In addition, it will identify any potential areas of work needed on the property (for example, minor cosmetic changes such as repainting or filling holes) and include a column outlining the landlord’s surveyor’s option for carrying out the work.

If you’ve been on the receiving end of a schedule, it can be an intimidating and daunting document, especially if the total figure is alarmingly high. The best thing to do in unfavourable situations is to remain calm and bear in mind that often the total at the end may not reflect what it is actually going to cost you to settle the claim.

Next, you should contact a solicitor or building surveyor. Your building surveyor will then work with you to assess the true extent of the case and your liability. Typically, there can be several repairs listed that may not be your responsibility under a professional interpretation of your lease. In addition, there may be items stated for which the work required has been overstated.

It is always worth noting that there is a statutory limit on the amount a landlord can claim for dilapidations, which can be based on the reduction in value of the property resulting from the dilapidations. If, for example, the landlord is looking to demolish the building, the dilapidations will have no effect on the value of the property, meaning there is no right to claim.

Like any legally binding matter, it is always best to be safe in order to prevent possible issues. Rather than wait for your landlord to serve a schedule, you should be fully aware of your obligations and take steps to guarantee you have measures in place to ensure the property is well kept. It also pays to ascertain the landlord’s plans for the property once your lease ends, just in case there are some repairs that you won’t need to undertake.

Dilapidations can be a confusing time, so if you’re uncertain about your exact liabilities, it’s always best to seek commercial property help from professionals.

Frequently Asked Questions about Dilapidations in the UK:

What are dilapidations?

Dilapidations refer to breaches of lease covenants related to the condition of a property. These breaches typically involve the failure to repair, decorate, or maintain the property in accordance with the terms of the lease.

Who is responsible for dilapidations?

The responsibility for dilapidations varies depending on the terms of the lease. In most cases, tenants are responsible for maintaining the property in good repair and condition throughout the lease term and for rectifying any dilapidations identified at the end of the lease.

When do dilapidations arise?

Dilapidations can arise at any time during the lease term, but they are most commonly addressed at the end of the lease, when the landlord conducts a schedule of dilapidations to assess the condition of the property and identify any breaches of the lease covenants.

What is a schedule of dilapidations?

A schedule of dilapidations is a document prepared by the landlord or their surveyor that details the repairs, decorations, and maintenance required to bring the property back into the condition specified in the lease. It may also include a quantification of the costs involved.

Can dilapidations be negotiated?

Yes, dilapidations can be negotiated between the landlord and tenant either directly or through their respective surveyors. Negotiations may involve agreeing on the scope of work required, the timeframe for completion, and the financial settlement.

How are dilapidation disputes resolved?

Dilapidation disputes can be resolved through negotiation, mediation, arbitration, or litigation. In many cases, disputes are settled through negotiation or mediation, which can be faster and more cost-effective than going to court.

What happens if dilapidations are not addressed?

If dilapidations are not addressed, the landlord may take legal action against the tenant to recover the cost of repairs and other remedial work. This could result in the tenant being liable for damages, including the cost of repairs, legal fees, and potentially additional penalties specified in the lease.

Can tenants dispute dilapidation claims?

Yes, tenants have the right to dispute dilapidation claims if they believe that they are not responsible for the alleged breaches of the lease covenants or if they disagree with the scope or cost of the remedial works proposed by the landlord.

How can tenants minimise dilapidation liability?

Tenants can minimise their dilapidation liability by conducting regular inspections and maintenance of the property throughout the lease term, keeping detailed records of repairs and improvements, and complying with the terms of the lease regarding repairs and maintenance.

Can dilapidation liability be transferred to a new tenant?

In some cases, the liability for dilapidations may be transferred to a new tenant if the lease includes provisions for assigning or subletting the property. However, the original tenant may still be liable if the new tenant fails to fulfil their obligations under the lease.