Are you liable for dilapidation works on the property you occupied?
The practical definition of dilapidations is the “exit costs” to the tenant of putting a property back into repair and potentially reinstating tenant’s alterations at the termination of a tenancy / lease. These dilapidations costs are frequently a shock to a tenant when a schedule of dilapidations and costs claim is served by the landlord when their lease ends.
Dilapidations are an area of growing dispute between landlords and tenants as the lifespan of leases becomes shorter. Allsop is one of the UK’s leading dilapidations specialists and advises tenants on the valuation and legal dilapidations issues that influence the level of dilapidations claims at lease / tenancy expiry.
Navigating a dilapidations claim goes way beyond than the schedule of dilapidations. It is the skill of the dilapidations negotiator that ensures the claim is kept to the absolute minimum. We are experienced dilapidations negotiators in this field. We:
- provide initial dilapidations estimates
- arrange a schedule / survey of dilapidations
- interpret the lease in relation to dilapidations
- if appropriate arrange for dilapidation works to be undertaken0
- advise on the implications of dilapidations legislation including section 18 of the Landlord & Tenant Act 1927 – this is the most crucial statutory provision for tenants – imposing caps on the landlords aspirations/claim
- advise tenants on whether to carry out the works within the dilapidations schedule
- advise on tactics / timings to employ in given circumstances
- negotiate the dilapidations claim
- advise on the Dilapidations Protocol ie best practice guidance for tenants
- preparing Section 18 valuations – which can have the effect of significantly reducing a tenant’s dilapidations liability.
Is there a difference between Dilapidations and Reinstatement?
Yes – dilapidations are repair works to the property which have not been undertaken by a tenant in contravention to the repairing clause in the lease. These can be limited by section 18 of the Landlord & Tenant Act 1927.
Reinstatement are works involving the removal and making good of alterations carried out on the premises by the tenant under either the “alterations” clause in the lease or “Licence to Alter” deed. These are not limited by section 18 of the Landlord & Tenant Act 1927 and it is important to properly understand the provisions of the lease to determine whether the landlord is required to follow specific procedures to validate a claim or to serve notices etc on time prior to the end of the lease.
When do I prepare for Dilapidations?
It is important to be prepared. Seek advice six to nine months before the end of the lease
As tenant, for tax and balance sheet purposes it may be necessary to seek an estimate of potential dilapidations liability three to four years before the end of the lease. We are happy to provide this estimate at no cost.
Otherwise, it may be cheaper to plan to undertake the dilapidation works than pay a settlement figure to the landlord. So make sure you have planned sufficient time to do this.
Is Dilapidations Always Payable?
No. The dilapidations liability can be limited by section 18 of the Landlord & Tenant Act 1927 to the lower of :
- the cost of undertaking the dilapidation repair works and
- the diminution of the landlord’s reversion due to the dilapidation works having not been undertaken.
The section 18 valuation can give valuable protection to the tenant. This is why it is important to have a dilapidations negotiator that has both valuation and property market expertise.
In some instances there may be express provisions (agreed at the outset) which allow the tenant to vacate free of any dilapidations cost
What is the Dilapidations Protocol?
Guidance to parties that the courts strongly encourage parties to follow during a dilapidations dispute to limit the costs and time incurred.
239 – 241 Shaftesbury Avenue, London WC2
The case involved a Victorian office building of approximately 2,500 sq ft.
The tenant, Rhinegold Publishing Ltd, received a dilapidations schedule from the landlord with a dilapidations claim of £180,000.
Rhinegold originally instructed a building surveyor from another firm to negotiate the dilapidations. The building surveyor negotiated the claim down to £90,000 and recommended settlement at this level. At this point Allsop was approached to provide a second opinion.
Allsop could immediately foresee a supersession argument here – where the future use of the building almost certainly ……… as residential, not the present office use.
We were instructed by Rhinegold and insisted on a section 18 valuation.
Over several months we negotiated the dilapidations claim down to £22,000. We saved the client a further £68,000 or 75% on the settlement recommended by the building surveyor highlighting that the skill of the dilapidations negotiator is critical to success.