Preparing and serving a dilapidations schedule

The quantified demand replaces and expands upon what was referred to in previous editions of the RICS Dilapidations guidance note and Dilapidations Protocol as ‘the claim’ or the ‘statement of loss’. Further guidance is also available in the RICS dilapidations bulletin: Outline guidance on the preparation of quantified demands and responses (September 2014).

In the current Protocol it is discussed in section 4 and in the guidance note, section 8.5. It is applicable to terminal claims. The quantified demand will usually (but not always) be prepared by the surveyor producing the schedule of dilapidations and it would also normally refer to or attach a schedule of dilapidations that has been endorsed. The quantified demand need not, itself, be endorsed, but there may be merit in doing so. If it is to be endorsed the surveyor should only endorse their own content. Content produced by others (such as a valuer) should be endorsed by them.

The Dilapidations Protocol states that the figures set out in the quantified demand ‘should be restricted to the landlord’s likely loss’. Due to the impact of section 18 the cost of the works may not necessarily equate to the landlord’s actual loss. This means that cases in which the works have and have not been carried out need to be approached differently.

Where the landlord has carried out the work, the quantified demand presents a fully quantified and substantiated summary of the costs incurred in executing the work and other associated losses (for example loss of rent, fees VAT etc.).

Where the works have not been carried out, the surveyor must take account of the landlord’s ‘likely loss’, having due regard also to the landlord’s future intentions for the property. This may require a section 18 valuation, requiring input from a specialist valuer. The cost of works and any other losses must also be ‘fully quantified and substantiated’ by a detailed estimate, which can be refined as further evidence is obtained. The guidance note suggests that, in cases where the landlord’s future plans for the building are not yet decided, the surveyor may, where necessary, mark particular sections of the quantified demand as being ‘to be advised’.

The quantified demand should be sent within 56 days of the end of a lease (the same timescale as sending a schedule of dilapidations). In practice it is often sent with the schedule. It should also specify a date (usually within 56 days of sending) by which the tenant should respond.

The Dilapidations Protocol (section 4) sets out the requirements of the quantified demand, which is expanded upon in the guidance note (section 8.5) - the latter of which also includes a specimen template (Appendix B).

Supporting information

A list of the documents referred to in the preparation of the claim, in particular, the lease, licences and other relevant deeds, should be included in the quantified demand.

The Dilapidations Protocol and the Dilapidations guidance note (7th edition) both stress the need to include supporting information when drafting a quantified demand. The information that is appropriate will stem from the actions that the landlord has taken, or intends to take, and is discussed elsewhere. The list of supporting information specified in these documents should not be interpreted as being either prescriptive or exhaustive.

Relevant supporting information may include contractor’s quotations, notices from statutory authorities, specialist reports and invoices for the works. It may be appropriate to provide such supplementary information to help the tenant understand the nature of the claim, or it can serve as justification of the work or costs claimed. Other information that may help to support a claim includes evidence of market rent, the service charge, information relating to the VAT status of the building and proof of the rates payable.

To assess what supporting information is necessary, it is important to consider it objectively and determine whether it will allow the tenant to understand and assess both what the landlord’s loss is and why it has been incurred. Thus, it should be understood that the spirit of the Dilapidations Protocol and of the Dilapidations guidance note (7th edition) is as important as the information listed. Where additional documents shed light on a claim (either supportive of it or contradictory to it), then these must be provided. Similarly, where an item of information is listed in the Dilapidations Protocol but has no material impact on the discussions, then it would be pointless, and a waste of fees, to obtain this. Tenants should not lazily refuse to consider a claim until all of the listed information is provided, when it might be plain that it is irrelevant.