Dilapidations can be one of the most contentious aspects of commercial property leasing. As experienced chartered building surveyors at Farnborough Surveyors, we regularly help both landlords and tenants navigate complex dilapidations claims across Hampshire, Surrey, and London. Understanding your obligations and rights is essential for avoiding costly disputes and protecting your interests at lease end.
What Are Dilapidations?
Dilapidations refer to breaches of lease covenants relating to the condition, repair, decoration, and reinstatement of leased premises. They represent the difference between the actual condition of the property and the condition it should be in according to the lease terms.
In commercial property leases, tenants typically have extensive repairing obligations. When these obligations are not fulfilled, landlords can pursue dilapidations claims to recover the cost of bringing the property back to the required standard.
Types of Dilapidations Claims
Terminal Dilapidations
Terminal dilapidations are claims made at the end of a lease term. These are the most common and often the most significant claims, covering:
- Disrepair accumulated over the lease term
- Failure to decorate according to lease requirements
- Alterations requiring reinstatement
- Breach of yielding up covenants
Interim Dilapidations
Interim dilapidations are claims made during the lease term, typically when:
- Tenants fail to maintain the property adequately
- Significant disrepair affects the landlord's reversion
- Insurance becomes void due to property condition
- Health and safety issues arise from neglect
Ongoing Dilapidations
These relate to continuing breaches of repairing obligations, often pursued alongside applications for forfeiture of the lease.
Understanding Lease Obligations
The extent of dilapidations liability depends entirely on the specific lease terms. Our chartered building surveyors carefully analyze lease covenants to determine precise obligations:
Repairing Covenants
Commercial leases typically include various repairing obligations:
Full Repairing Lease
Tenant responsible for all repairs including:
- • Structural repairs
- • External maintenance
- • Internal repairs
- • Services and plant
Internal Repairing Lease
Tenant typically responsible for:
- • Internal repairs only
- • Fixtures and fittings
- • Some services
- • Decoration
Decoration Obligations
Decoration clauses typically require:
- Regular redecoration during the lease (often every 3-5 years)
- Final decoration before lease end
- Use of good quality materials and workmanship
- Compliance with specified color schemes or landlord approval
Reinstatement Obligations
Many leases require tenants to remove alterations and reinstate the property to its original condition, which can include:
- Removing partitions and fitted furniture
- Reinstating original floor coverings
- Removing additional electrical and data points
- Restoring original room layouts
The Dilapidations Process
1. Property Inspection
The process begins with a comprehensive inspection by qualified chartered building surveyors:
- Detailed condition survey of all areas
- Comparison against lease requirements
- Photographic documentation of breaches
- Assessment of repair and reinstatement needs
2. Schedule of Dilapidations
Following inspection, a formal schedule of dilapidations is prepared, detailing:
- Specific breaches of lease covenants
- Required remedial works
- Estimated costs for each item
- Professional fees and associated costs
Important Timing
Schedules are typically served within 56 days of lease end, though they can be served during the lease term for interim claims. Early service allows for negotiation and potential tenant remedial works.
3. Tenant Response Options
Upon receiving a schedule of dilapidations, tenants can:
- Accept the claim: Agree to pay the amount claimed
- Negotiate: Dispute costs or items through professional surveyors
- Prepare a response: Formal Scott Schedule challenging claims
- Carry out works: Complete repairs before final settlement
4. Scott Schedule Preparation
A Scott Schedule is a formal response document comparing landlord claims with tenant positions:
| Item | Landlord Claim | Tenant Response | Agreed Amount |
|---|---|---|---|
| External decorations | £15,000 | £8,000 (partial scope) | £10,000 |
| Carpet replacement | £5,000 | £0 (fair wear and tear) | £2,000 |
Key Legal Concepts in Dilapidations
Fair Wear and Tear
This fundamental concept exempts tenants from liability for deterioration caused by reasonable use:
- Normal aging of materials and systems
- Reasonable use by occupiers
- Effects of weather and environment
- Gradual deterioration over time
However, fair wear and tear does not excuse:
- Negligence or misuse
- Failure to carry out minor maintenance
- Damage from alterations or improvements
- Consequential damage from neglect
Section 18 Valuation
The Landlord and Tenant Act 1927, Section 18, limits dilapidations claims to the amount by which the landlord's reversion has been diminished. This means:
- Claims cannot exceed the loss in property value
- No recovery if the landlord intends immediate redevelopment
- Limited recovery for works the landlord wouldn't undertake
- Supersession where landlord's works exceed tenant's obligations
Successful Section 18 Defense
We recently defended a tenant facing a £200,000 dilapidations claim. Through Section 18 analysis, we demonstrated that the landlord's planned refurbishment would supersede most claimed works, reducing the settlement to £45,000 - a saving of over 75%.
Diminution in Value
Diminution valuations assess how dilapidations affect property value:
- Comparison of property value in actual vs. covenant-compliant condition
- Market evidence of similar properties
- Impact on rental value and investment yield
- Future development or refurbishment plans
Landlord Strategies and Considerations
Effective Lease Management
Proactive lease management minimizes dilapidations disputes:
- Regular Inspections: Annual condition surveys during lease terms
- Schedule of Condition: Baseline documentation at lease commencement
- Interim Notices: Early warnings about developing breaches
- Consent Management: Proper control of tenant alterations
Maximizing Recovery
Landlords can optimize dilapidations recovery through:
- Comprehensive and accurate schedules
- Professional cost estimation
- Strong lease covenant drafting
- Proper documentation and evidence
Common Landlord Mistakes
- Over-specification of works beyond lease requirements
- Inadequate consideration of Section 18 limitations
- Poor documentation and photographic evidence
- Unrealistic cost estimates and specifications
Tenant Defense Strategies
Challenging Dilapidations Claims
Effective tenant defense requires systematic challenge of claims:
Lease Interpretation
- Precise analysis of repairing obligations
- Exclusions and limitations in lease terms
- Fair wear and tear provisions
- Landlord's repair responsibilities
Factual Challenges
- Condition at lease commencement
- Cause and timing of defects
- Previous repairs and improvements
- Use and occupation patterns
Quantum Challenges
- Specification appropriateness
- Cost reasonableness and market rates
- Necessity and scope of works
- Professional fees and preliminaries
Settlement Negotiations
Most dilapidations claims settle through negotiation. Key factors include:
- Strength of respective positions
- Cost and time of litigation
- Commercial relationship considerations
- Market conditions and property values
Dilapidations in Different Property Types
Office Properties
Office dilapidations commonly involve:
- Removal of fitted furniture and partitions
- Reinstatement of original floor coverings
- Decoration to modern office standards
- IT and telecommunications infrastructure removal
Retail Properties
Retail dilapidations focus on:
- Shop front condition and branding removal
- Internal fit-out and fixture removal
- Floor finishes appropriate for retail use
- Security and access systems
Industrial Properties
Industrial dilapidations often involve:
- Specialized plant and equipment removal
- Contamination and environmental issues
- Structural modifications and reinforcements
- External areas and roadways
Cost Management in Dilapidations
Typical Cost Components
| Cost Element | Typical Range | Key Factors |
|---|---|---|
| Building Works | 70-85% of total | Scope and specification |
| Professional Fees | 10-15% of works | Complexity and duration |
| Preliminaries | 5-10% of works | Site access and setup |
| Contingencies | 5-10% of total | Risk and uncertainty |
Cost Control Strategies
- Competitive tendering and market testing
- Value engineering and alternative specifications
- Phased works and priority scheduling
- Professional fee negotiation
Alternative Dispute Resolution
Most dilapidations disputes resolve without court proceedings through:
Expert Determination
- Binding decision by independent chartered surveyor
- Faster and less expensive than litigation
- Technical expertise in property matters
- Limited grounds for appeal
Mediation
- Facilitated negotiation with neutral mediator
- Preserves commercial relationships
- Flexible and creative solutions
- Non-binding unless agreed
Independent Expert Assessment
- Technical evaluation by specialist surveyors
- Focus on quantum and methodology
- Evidence-based analysis
- Foundation for settlement negotiations
Prevention and Risk Management
At Lease Commencement
Proper documentation at lease start prevents future disputes:
- Schedule of Condition: Comprehensive baseline documentation
- Photographic Records: Detailed visual evidence
- Professional Surveys: Independent condition assessments
- Clear Lease Terms: Unambiguous repair obligations
During the Lease Term
- Regular maintenance and inspection programs
- Proper documentation of repairs and improvements
- Professional advice on alteration consents
- Ongoing dialogue between landlord and tenant
Approaching Lease End
- Pre-expiry condition assessments
- Planned remedial works programs
- Professional surveyor engagement
- Early settlement discussions
Frequently Asked Questions
When should I expect to receive a schedule of dilapidations?
Typically within 56 days of lease expiry, though they can be served earlier or during the lease term for interim claims. Early service allows time for negotiation or remedial works.
Can I be charged for improvements I made to the property?
Yes, if your lease requires reinstatement to original condition. However, landlords cannot recover costs exceeding the diminution in property value, and many improvements actually enhance value.
What constitutes fair wear and tear?
Normal deterioration from reasonable use, age, and weather exposure. It doesn't include damage from negligence, misuse, or failure to carry out minor maintenance that would prevent deterioration.
Should I carry out the works or pay the claim?
This depends on various factors including cost comparison, timing, control over specification, and ongoing occupation. Professional advice helps determine the most cost-effective approach.
Why Choose Farnborough Surveyors for Dilapidations
As experienced chartered building surveyors specializing in dilapidations across Hampshire, Surrey, and London, we offer:
- RICS qualification and regulation ensuring professional standards
- Comprehensive dilapidations expertise for landlords and tenants
- Local market knowledge of Hampshire and Surrey property markets
- Proven track record in dispute resolution and cost reduction
- Professional indemnity insurance for your protection
- Collaborative approach with legal and other professional advisors
Our team has successfully managed dilapidations claims worth millions of pounds, consistently achieving favorable outcomes for both landlords and tenants through professional expertise and strategic advice.
Need Dilapidations Advice?
Whether you're a landlord preparing a claim or a tenant facing dilapidations, our expert chartered building surveyors can protect your interests and minimize costs through professional advice and strategic representation.
Get Expert Dilapidations AdviceThis article was written by James Richardson MRICS, Senior Chartered Building Surveyor at Farnborough Surveyors. With over 15 years of experience in dilapidations across Hampshire and Surrey, James specializes in commercial property lease end procedures, dispute resolution, and cost minimization for both landlords and tenants.