What are Dilapidations?
Dilapidations is the term normally used for repairs required under a Lease. Most commercial Leases in the UK place an obligation on the Tenant to undertake a variety of repairs, decoration and other express covenants which may include complying with Legislation, cleaning the Premises or reinstating any alterations at the end of the Lease. Dilapidations is the term generally used for the works which a Landlord asks a Tenant to undertake either during the term, or at lease end.
The difference between residential and commercial Tenancies
In the UK the main difference between most residential and commercial agreements is that typically a Landlord would be responsible for the repairs to a residential property and the Tenant would be responsible for repairing a commercial demise. The exact terms of this are dependant upon the terms of the Lease, which is the Contract between the Landlord and Tenant. The basic legal principles of any Dilapidations Claim is therefore based on Contract Law.
Record of Condition
There is often a requirement to record the condition of a building either prior to a Lease or before some construction work or access onto a property is made. This is often referred to as Dilaps or Delaps although this would normally be called a Schedule of Condition. This is a detailed record of the condition of the building and when used in a Lease can be very useful to limit a Tenants liability at the end of the term or illustrate works a Landlord is claiming.
What is a Schedule of Dilapidations?
A Schedule of Dilapidations is the document which the Landlord would prepare to identify the works required by the Tenant. This would typically identify why the Tenant is in Breach of the Lease, what Lease clauses they should comply with and the works a Landlord considers are necessary. In some cases the Landlord may advise the Tenant of the cost of these works. If served during the Term this is known as an Interim Schedule of Dilapidations, or in some cases a Repairs Notice. If the Lease is about to end the document may be called a Draft Terminal Schedule of Dilapidations, and if the Lease has ended then the Landlord would be making the claim for Terminal Dilapidations. The final claim is also known as a Quantified Demand.
If a Landlord is concerned over the condition of their property then under most modern Leases a Landlord can undertake an inspection, assess whether the Tenant is complying with the terms of their Lease and issue a Notice on the Tenant. Depending upon the wording of the Lease, the Landlord may issue a Section 146 Notice or a Simple Repairs Notice which the Tenant must comply with. In some cases if the Tenant does not comply, the Landlord can enter the property, undertake the work and claim back the cost from the Tenant.
Does the Landlord have to serve a Schedule of Dilapidations?
Overall there is no obligation on the Landlord to remind the Tenant of the works they should undertake under a Lease. It is the Tenants responsibility to read the Lease and undertake the works required by their Lease. Under most Leases, a Tenant is required to reinstate any alterations they make and in some cases a Landlord must notify the Tenant if they require reinstatement. This is not always the case and the Lease will often place the obligation on the Tenant to reinstate any alterations they have made.
How do you assess the standard of repair?
This is something a lot of Tenants are unsure over, in particular if they are undertaking the work. The wording of the Lease will typically state the extent and quality of works required and in some cases this may be limited to the condition shown in a Schedule of Condition, which would record the state at the start of the Lease. The age and character of the building is also important as the standard of repair on a new property may vary from a short term Lease on an older site, which may have been let many times. A basic principle which is often followed is that a Tenant is required to undertake the repairs, to a standard which would be acceptable to a reasonably minded Tenant, having regard to the “age, character and location of the property”, on Lease commencement.
How do you know what work to undertake?
Hopefully most Landlord’s would be helpful in advising the Tenant of the works which they consider needed by the end of the Lease. In some cases a Landlord must notify the Tenant if reinstatement of alterations are required and in some cases the colour of decoration, the type of carpet or similar must be agreed with the Landlord. If a Tenant is unsure or requires more detailed advice then it can be useful to prepare a Dilapidations Assessment. This can be prepared by a Chartered Building Surveyor and it would be similar to a Schedule of Dilapidations. It would review the Lease, consider the Tenants obligations, assess the condition of the building and suggest the works which may be required. This could be useful if a Tenants requires an early indication of work required. It is also very useful to provide a future Dilapidations budget, in particular if required for accountancy purposes, where under FRS102 a Dilapidations Assessment may be required by Auditors to provide future provision in companies accounts.
Procedures should be followed by both Landlord’s and Tenants when dealing with Dilapidation’s. In particular the Royal Institute of Chartered Surveyors provide useful guidance in the form of the RICS Guidance Note, Dilapidations in England and Wales, 7th Edition. It is also important to follow the Dilapidations Protocol, which is the Pre-Action Protocol for claims for damages in relation to the physical state of a property and this is published by the Property Litigation Association.
What do you do if you receive a Claim from the Landlord
Whether received during or after a Lease, the first step would be to check the terms of your Lease or similar agreement to establish if you are liable for the property and the parts claimed. It may be useful to refer to a Chartered Building Surveyor for further advice. If the Lease has ended then the Dilaps Protocol requires the Tenant to respond to the Landlord within 56 days, otherwise they may incur penalties if the Claim proceeded to Court.
The further defence and negotiation of Dilapidations can be a difficult and protracted process and we would recommend the advice of a Chartered Building Surveyor at all stages of this process.