Solicitor Lauren Johnson, in our Dispute Resolution team, explains how commercial landlords and tenants should deal with dilapidations.
What are dilapidations?
The term dilapidations in commercial leases refer to items of disrepair that are covered by repairing covenants contained in a lease.
Usually under the terms of a lease, a tenant will be required to maintain and repair the property during the tenure of the lease and return the property to the landlord in its original condition.
What is a dilapidations schedule?
A dilapidations schedule is a document which contains a detailed list of all the repairs required in a property. The documents will list each item of repair, the works required to remedy the repairs and associated costs. Normally, a surveyor will carry out in inspection of the property and produce the schedule.
Once the dilapidations schedule has been prepared, it should be served on the tenant. The lease may contain provisions on how to serve the dilapidations schedule.
The schedule can be prepared during the term of a lease or after the lease has ended. A dilapidations schedule served on the tenant during the term of a lease is known as an interim dilapidations schedule and if it is served after termination of the lease it is known as a terminal dilapidations schedule.
The schedule should comply with the requirements set out in the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy.
A dilapidations schedule is an important document for both the landlord and tenant during a dilapidations dispute and should be prepared as soon as possible.
Compliance with the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy
The Dilapidations Protocol requires the landlord to serve a schedule of dilapidations within a reasonable period which the Protocol suggests being within 56 days after the termination of the tenancy.
If a landlord does not comply with the Pre-Action Protocol non-compliance will likely only result in cost sanctions but will not stop a landlord from bringing the claim. However, a lease may contain provisions regarding a landlord’s right to bring a claim, which the landlord should have regard to when dealing with dilapidations.
If a landlord has already served an interim schedule of dilapidations, they should consider if an updated version should be served after termination of the lease.
Potential options available for a landlord dealing with dilapidations
1) Landlord’s claim for damages
A tenant's failure to comply with its repairing covenant may entitle the landlord to claim damages.
Depending on the provisions in the lease, a landlord can bring a claim for damages during the term of the lease or after.
2) Forfeiture of the lease
Forfeiture is another option that may be available to a landlord for a breach of covenant by the tenant. The landlord must have an express right of re-entry reserved in the lease.
If a landlord is considering forfeiting the lease for a breach of repairing covenant by peaceable re-entry or proceedings the landlord must serve a section 146 notice on the tenant.
Dealing with dilapidation claims can be complex, time consuming and costly. Our Dispute Resolution team can advise on property related disputes.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
