Dilapidations

You have received a schedule for a large sum and it looks like a bill. It is not. It is an opening position, and the amount actually recoverable is usually a good deal less.

Why the figure is usually too high

Three reasons, and they compound.

The cap is the damage to the reversion, not the cost of the works. A landlord cannot recover more than the amount by which the value of its interest has been diminished by the breach. Where the property is to be redeveloped, refitted for a different use, or relet in a different configuration, the works in the schedule may make no difference to value at all — and the claim reduces accordingly, sometimes to very little.

Schedules are prepared to include everything arguable. That is their function. Items are routinely included that fall outside the covenant, reflect improvement rather than repair, or relate to wear the lease does not require the tenant to make good.

Supersession. Where the landlord’s own intended works would supersede the tenant’s repairs — stripping out a floor the tenant has been asked to redecorate — the tenant does not pay for work that was going to be undone.

What actually has to be established

What the covenant requires, which depends on the lease’s wording — “good and substantial repair”, “tenantable repair”, and similar formulations are not identical, and a schedule of condition attached at the start changes the obligation significantly.

Whether there is a breach, item by item.

The cost of remedying it, which is where the surveyors differ.

The loss to the landlord, which is the cap and the real question.

Reinstatement, separately — removing alterations and putting the premises back, which depends on what was licensed and what the licence required.

Interim and terminal schedules

Terminal schedules, served at or near the end of the term, are the usual case.

Interim schedules are served during the term, and they are a different exercise — the landlord may seek specific performance or damages, and statutory restrictions can apply to claims during the currency of a longer lease. If you receive one, the position is not the same as at the end of the term and it is worth advice.

For landlords

The mirror of all of the above. A claim is worth preparing properly rather than optimistically: a schedule that includes obvious improvement items and ignores the reversion loss invites a robust response and weakens the credible parts.

The strongest claims are evidenced on value as well as on cost, and prepared with the landlord’s actual intentions for the property in mind, because the tenant will ask.

What we do

Review the schedule against the lease, item by item, and identify what falls outside the covenant. Work with building surveyors on cost and with valuers on reversion loss where the sums justify it. Negotiate, which resolves the large majority. And litigate where necessary.

For landlords, the same in reverse — and honest advice about what is realistically recoverable before the costs of pursuing it exceed the benefit.

What it costs

£400 per hour plus VAT with an estimate by stage. Surveyor and valuer fees are additional, and we will tell you when the sums justify them and when they do not.

An initial review of a schedule — what is arguable, what is not, and a realistic range — is a fixed fee. On a schedule of any size it usually pays for itself several times over.

Questions

Questions people ask us

The schedule says £180,000. Do I have to pay it?

Almost certainly not that figure. Schedules are opening positions, they routinely include items outside the covenant, and the landlord’s recovery is capped by the loss to the value of its interest rather than the cost of the works.

They are redeveloping the building. Does that affect the claim?

Potentially enormously. If the works would be superseded by the landlord’s own plans, the tenant does not pay for work that was going to be undone — and if the property’s value is unaffected by the disrepair, the claim can reduce to very little.

What is a schedule of condition worth?

A great deal, if one was attached to the lease. It limits the obligation to the condition recorded at the start, which can transform a dilapidations claim. Always check whether there is one.

Do I need my own surveyor?

Usually yes on anything substantial. The costings in a landlord’s schedule are prepared for the landlord, and an independent assessment is generally where the negotiation starts.

Can they force me to do the works instead?

At the end of the term, generally not — the claim is for damages. During the term, a landlord may have other remedies including specific performance, which is one reason an interim schedule needs different advice.

The hub

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Lease renewal and the Landlord and Tenant Act 1954 →

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