INSIGHT

Don’t fall down over dilapidations

By Anthony Alder

- Last updated on GMT

Related tags: Renting, Leasehold estate

'Keep on top of day-to-day maintenance and set aside a sinking fund each year for larger repairs'
'Keep on top of day-to-day maintenance and set aside a sinking fund each year for larger repairs'
Anthony Alder, director at AG&G chartered surveyors, lifts the lid on what you need to know to help you avoid claims by landlords

Lease-end dilapidation claims of more than a year’s rent are common — the Royal Institute of Chartered Surveyors estimates their value in England and Wales at around £3.36bn per annum.

A landlord brings a dilapidations claim — essentially, damages — against a tenant for wants of repair, decoration and/or reinstatement and also for signage, cleaning and failing to return the premises at the end of the lease in the condition required by the lease.

The claim comes either at or after lease expiry (terminal) or part-way through the term (interim) and its extent is dependent on the covenants in the lease — the wording of the repairing covenant in the lease is critical.

Steps

The first thing a publican should do is to carry out a schedule of condition before entering into a lease, so you can prove what condition the premises were in at the outset and have a benchmark for how they are left.

The second thing is to keep on top of day-to-day maintenance and set aside a sinking fund each year for larger repairs, such as roofs, water ingress or rising damp.

Thirdly, it’s a good idea to hire your own surveyor, who will be able to advise what work you need to do before the lease ends and can help to negotiate with the landlord if a claim is brought.

Damages

The starting point for estimating damages is the cost of works and other losses, such as rent missed while the work is being carried out — but Section 18 of the Landlord and Tenant Act 1927 limits the amount of damages.

Damages for dilapidations are capped at the amount by which the value of the landlord’s revision has been diminished — this could include loss of value of the premises as well as cost of works and loss of rent.

The landlord cannot recover any damages when it intends to pull down the property at or shortly after the termination of the tenancy agreement.

The Dilapidations Protocol states the tenant should receive a Schedule of Dilapidations and a Quantified Demand, normally within 56 days of the termination of the tenancy. Within 56 days of receiving these, the tenant must respond. Then the parties negotiate with a view to narrowing the issue and settling the dilapidation claim.

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Related topics: Property law

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