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An Introduction to Dilapidations

The subject of Dilapidations is undoubtedly one of the main areas of dispute for landlords and tenants and it can be the subject of some huge claims made against tenants, leading to costly and expensive court cases

Many tenants will happily sign up for their commercial property, blissfully unaware that they are taking on a Full Repairing Liability and that they could be required to hand back the property at the end of the lease in repair, even if it was not in that condition at the outset.

Dilapidations usually arise at the end of a commercial lease, although some landlords may try to serve an Interim Schedule during the term of the lease if the tenant isn’t looking after the property. A Schedule of Dilapidations will be prepared by the landlord’s surveyor highlighting the areas where the property has not been kept in repair in accordance with the terms of the lease.

It is therefore vital that the tenants should read and understand their leases and have a good idea of the condition of a property before they sign up for it.

It might be argued by some that landlords surveyors have in the past exaggerated their schedules to include as many items as they possibly can, in order to try and inflate their clients claim.  The tenants will also instruct a surveyor to act on their behalf and this exaggeration can work on both sides, often leaving the parties miles apart from any settlement.

I can personally remember dealing with a very pompous West End surveyor over some carpet tiles in an office in Rochford. The tenant had been in occupation for about 10 years and the carpet was stained and worn in places where castored offices chairs had been rolling over them. Clearly the tiles were in disrepair and should have been replaced. The rest of the carpet wasn’t as bad, but was 10 years old and had been subjected to usual office traffic.

I argued that the carpet wasn’t in repair, due to the use it had been subjected to over the 10 years of the tenants occupation. The surveyor in question disagreed and argued that only part of the carpet was in disrepair. He insisted on counting the number of worn carpet tiles and offering to replace with new tiles amidst the old worn ones. I still wonder what that would have looked like, if he were able to obtain a matching tile. After many months arguing about this and several other similar items, we reached an agreement and the matter was settled, but it could have been so much easier with a bit of goodwill on both sides.

The RICS has issued guidance notes on this subject over the years and the latest version of this was published in Sept 2016. This document tries to encourage more honesty and a less adversarial approach in the preparation of Schedules, whether this will be fully adopted by surveyors fighting their client’s corner, remains to be seen.

For the tenant worried about taking a building on that is perhaps not in the best condition, then there are various remedies. Perhaps the easiest is to ask for the preparation of a Schedule of Condition which will document the condition of the property at the outset of the lease. The repairing clauses will then be altered so that the tenant doesn’t have to hand it back in any better condition than that documented in the schedule.

If you find yourself in such a situation then take advice from a surveyor who is an expert in this specialist field and can lead you through what can be a minefield.