A beginner’s guide to dilapidations claims for landlords

When the lease is approaching its final year, landlords should consider their position in relation to the condition of the property and review the relevant provisions of the lease. They should inspect the property and take advice from a specialist dilapidations surveyor.

It may also be beneficial to seek legal advice at an early stage because a particular trap for the unwary is that the lease may require the landlord to give notice to reinstate alterations. It is common for leases to require such a notice to be given a set period before the lease ends (e.g. three or six months) but even absent such a provision, it might be implied that notice needs to be given sufficiently early to allow the tenant time to carry out the works. If the lease does require notice to be given and if that notice needs to be in a particular form or served on a particular timeframe then those obligations must be complied with. To avoid being caught out, consider these issues early.

Your surveyor will typically inspect the property and prepare a schedule of dilapidations setting out the wants of repair, redecoration and reinstatement. This will sometimes also include estimates of the cost of the works along with professional fees which will make up the landlord’s damages claim. Consider providing the schedule to the tenant prior to the end of the lease (timing may depend on the specifics of the case and landlords should follow the advice of their surveyor but in most cases, at least six months before the end of the lease would be appropriate).

At the end of the lease the surveyor should re-inspect the property and produce an updated schedule. The damages claim will be based on the condition of the property when the lease ended so it will be important (for both parties) to have good evidence of the condition and form of the property at that time.

The updated schedule should then be served on the tenant in line with the pre-action protocol for dilapidations claims and the tenant should be given an opportunity to respond. Often the tenant will instruct a surveyor at this point if they have not done so already and both sides’ surveyors can negotiate separately as to how to resolve outstanding repairs and reach a settlement. Your surveyor should express a willingness to meet with the tenant’s surveyor to discuss the claim. 

During negotiations, both sides should seek to narrow the issues in dispute and consider mediation as a cheaper and faster route to settlement than a court claim. In any event, if litigation is entered into, the courts increasingly expect parties to explain why alternative dispute resolution in some form has not been attempted and costs sanctions may follow if it has not been explored. 

It is not the purpose of this guide to go into detail about the valuation of the damages claim but it is worth noting that the landlord’s actions at the end of the lease can have a very significant impact on the amount of the claim. 
Whilst the starting point for the claim is the reasonable cost of the works to put right the breaches of lease, the claim is limited by statute to the amount by which the value of the landlord’s interest in the property is diminished by the disrepair. To use an extreme example, if the landlord intends to demolish the building at the end of the lease, thereby rendering the repair works pointless, the landlord will probably not have a claim at all. Less substantial renovation or improvement works can reduce the amount that can be claimed. 

A sale of the property or re-letting can provide evidence of value that may help or hinder the landlord’s case. The benefit of taking early advice from your surveyor and solicitor on these matters cannot be overstated.  

Another potential issue for landlords to consider is that the renewal of a tenant’s lease could also have a negative impact on the dilapidations claim. If a lease with a long term (say 25 years) is followed by a lease with a short term (say one year) it is possible that the court would construe the tenant’s repairing covenant by reference to the shorter term. 

In other words, if say, the roof needs replacing, a court could conclude that it could not have been the intention of the parties to a one-year tenancy that the tenant would be liable for the substantial costs of replacing the roof. This analysis would ignore the tenant’s previous 25 years in occupation. 

A possible way to address this would be to include in the new lease a term that the tenant’s repairing covenant is to be construed as though the term started at beginning of the first lease.