Dilapidations claims: overview

Getting to grips with dilapidations

11 April 2011

Dilapidations: a licence to print fee notes or an opportunity to give a client an early and speedy settlement reflecting an accurate and sustainable claim? The answer is in our hands, says John Woodman

The vast majority of commercial leases contain tenant covenants to repair, decorate, comply with statute, and to yield up the demised premises at the term end in a physical state which reflects these undertakings. Many leases also include a tenant’s covenant to reinstate alterations at the term end (or alternatively the lease may require a tenant to obtain landlord’s consent to carry out alterations and a requirement to reinstate at the end of the term may be included in any licence granted). Failure to comply with one or more of these covenants can lead to a claim for dilapidations during (an interim claim) or, more commonly, at the end (a terminal claim) of the term.

The wording and hence the meaning and effect of these covenants differs substantially from contract to contract. Well-advised landlords and tenants will be made aware of this prior to signing the lease. Unfortunately, many are not and hence it comes as a shock to the tenant to be told that, for instance, ‘to keep in repair’ means to put and keep or that a covenant to keep property in ‘good repair and condition’ substantially increases one’s obligation compared to an ordinary covenant to repair. Such a clause could require works which might, at first glance, appear to amount to an improvement of the premises originally leased.


Sadly, the subject of dilapidations has, over the years, attracted a poor press and exaggerated, inaccurate and downright misleading claims and defences were at one time, common

In consequence, and in the present market in particular, it is also advisable for a proposed tenant to obtain a survey ahead of lease negotiations from a surveyor well versed in the meaning and effect of lease covenants. In the full knowledge of the physical state of the property in question, the proposed tenant may argue that covenants should, for instance, reflect yielding up the property in no better state of repair than existed at the term commencement date (evidenced by a full schedule of condition annexed to the lease). Such a clause might of course be reflected in the rental payable and hence landlords should make sure that any change in tenant covenants are referred back to its valuation advisor prior to finalising the rental. From experience, it is evident that this often does not happen.

Additionally, the statutory and common law rules applicable to dilapidations differ from case to case, often according to the circumstances and the remedial option chosen by the landlord. For instance, a landlord may have the benefit of a tenant’s covenant enabling the landlord to conduct works of repair during the term, in the default of the tenant, and recover the costs arising as a debt (known as a Jervis v Harris clause after the name of a court case which found that such costs expended are a debt and not a claim in damages).

In all cases, preparation of an accurate schedule of dilapidations is required reflecting the lease clause purportedly breached, the breach complained of, the remedial works required and, if damages are being sought, the cost of the works. For an interim claim, the schedule may be served annexed to a s146 notice (pursuant to s146 Law of Property Act 1925) if the landlord is seeking forfeiture for the breach or if s1 of the Leasehold Property (Repairs) Act 1938 applies (i.e. the lease is for a term of seven years or more of which three or more are left to run) and damages are sought. In all cases, the schedule must be served in accordance with any relevant clause in the lease (which often dictates upon whom, where and how notices, including schedules, should be served).

Equally, in all cases (leaving aside those involving Jervis v Harris clauses) in which the landlord is making a claim in damages, the claim shall not exceed the amount (if any) by which the value of the reversion in the premises is diminished owing to the breach of the covenants complained of. Further, no damages are recoverable if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the lease end be pulled down or structural alterations made which would render valueless the repairs required (see s18(1) Landlord and Tenant Act 1927).


In all cases, preparation of an accurate schedule of dilapidations is required reflecting the lease clause purportedly breached, the breach complained of, the remedial works required and, if damages are being sought, the cost of the works

With a terminal claim, this will require the landlord and its advisors to consider the landlord’s intentions for the demised premises at the termination of the lease and to exclude from the schedule of dilapidations (and from the claim) those works which will be superseded by the landlord’s works. So, for instance, if the lease and the schedule require works of repair to partition walls within the premises which will in fact be removed by the landlord to create an open area, then the said works of repair should not be included in the schedule. However, if those partitions should have been removed by the tenant in accordance with a covenant to reinstate and have not been removed, then the landlord can claim the costs of their removal and of the subsequent remedial works to the premises thereby caused.

In such instances, it is all a question of timing. A landlord may during the lease term decide that it will, at the end of the term, simply have conducted those works which the tenant leaves undone and for which it is liable.

However, a change in the letting market may later demand more extensive works making unmarketable those premises which do not contain, for instance, raised floors conducting the latest technology and under floor heating and/or suspended ceilings fitted with modern lighting and air conditioning. Offices may be more economically utilised for housing but that does not mean to say that that is what the landlord will do with the premises at the lease end. It all depends on what the landlord does or could do at or shortly after the lease term.

That is the relevant time, not prior to or at some time after the term end.

Herein lies one of the main complications with a claim for dilapidations and any surveyor not fully acquainted with the intricacies of the subject should proceed with caution when advising either a landlord or a tenant. RICS has produced a guide to best practice – the Dilapidations guidance note, 5th edition and this should be the first port of call. Take care, however – the note is what it says, it is a guide and does not replace a full, detailed text book, experience in this complicated area and an understanding of the market.

Sadly, the subject of dilapidations has, over the years, attracted a poor press and exaggerated, inaccurate and downright misleading claims and defences were, at one time, common. However, experience and understanding, reflected in the much publicised protocol produced by the Property Litigation Association (with a considerable membership of property litigation lawyers throughout the country) has highlighted the problem and, to a very large degree, eliminated it. While still awaiting formal adoption under the Civil Procedure Rules (CPR), it is a document often referred to by practitioners (appended as it is to the guidance note referred to above). Unfortunately, it is now, on occasions, slavishly followed or it is demanded that it be followed to the detriment of a speedy, efficient and accurate settlement of the claim.

And that is what is required by clients, be they landlord or tenant. Dilapidations should not be what it has for many advisors unfortunately become – a licence to print fee notes. It is an opportunity for the surveying world to show the property world what it can do for the industry.

John Woodman is Senior Partner of Malcolm Hollis

Further information