For landlords and tenants alike, being aware of what dilapidation claims are and how they work can save you time, money and potential disputes at the end of a lease. You need to understand what rights you have, what obligations you must fulfil, and how a typical claims process works.
Not only this, but it can also help hugely to know what options you have should disputes arise between yourself and the other party.
With this in mind, Talbots Law’s expert guide is here to break down the dilapidation process, what the different types of claims are, and how to protect your interests in the event of disagreement.
Let’s start by exploring what the definition of dilapidations is.
What Are Dilapidations in Commercial Property?
In commercial property, dilapidations are costs that are incurred in order to repair or resort a property to the condition agreed to in the original lease. Typically, these costs are the responsibility of the tenant, and may include any restorations or alterations deemed necessary to bringing the property up to the agreed upon standard.
These requirements are usually set out by the landlord in the Schedule of Dilapidations, which is a legal document that sets out what specifically needs to be altered and how much it will cost. It is not, however, necessarily representative of what the costs are to settle any claim – rather, it is indicative of how much is needed to complete the restorations.
Once the Schedule of Dilapidations is presented to the tenant, a formal Dilapidations Claim can be made.
The Dilapidations Claims Process: Step-by-step
The dilapidation claims process generally follows a number of key steps. Firstly, informing the tenant of the potential claim, secondly, surveying and inspecting the property, and thirdly, settlement and enforcement.
Let’s explore these steps in greater detail:
Notice to the Tenant
Dilapidation claims usually begin with the landlord informing the tenant of their desire to assess the property for any damages or disrepair. This will be a general outline of what the tenant will need to do in order to meet the requirements by the end of the lease.
This may happen during the lease term or as the lease approaches expiry.
Dilapidations Survey and Inspection
Once this notice has been served, a formal survey or inspection is conducted by the relevant party – usually either the landlord, someone professionally-appointed by the landlord, or a chartered surveyor.
This survey will seek to find out what the extent of the damage is for the property, and what the condition of the property is versus what the lease agreement shows. It also estimates the cost of repairing the property.
The findings of this survey are then recorded in the afore-mentioned Schedule of Dilapidations.
Settlement and Enforcement
At this point, the process moves to settlement and enforcement. Here, the tenant has a number of options – they can either respond directly, negotiate, or arrange for repairs.
Should parties agree to an arrangement, the claim can be settled. How it is settled will apply to the specific circumstances of that claim, but typically it will involve a monetary exchange or the completion of the necessary works.
However, if no such agreement can be reached, disputes may arise, and the matter could be solved via the courts. This may involve arbitration or other dispute resolution mechanisms.
Court proceedings are typically a last resort, and both landlords and tenants are usually encouraged to explore negotiation or alternative dispute resolution to avoid unnecessary costs and delays.
Different Types of Schedules of Dilapidations
As dilapidation claims can occur at different phases of a tenancy, and as they are highly dependent on what the condition of property is, there are different types of Schedules of Dilapidations to be aware of.
Some of these types include:
Terminal Dilapidations
Terminal dilapidations are typically served towards the end of a lease. The idea behind these is to give the tenant enough time to complete any necessary works or prepare for a settlement before their tenancy period ends. As such, they should be handed over with a good chunk of time remaining on the lease.
If a landlord does not hand over this type of schedule with enough time to reasonably complete the works, they may be prevented from adding certain requirements.
Interim Dilapidations
Interim dilapidations are usually more specific than terminal dilapidations as they are intended to target a specific repair or restoration while the lease is ongoing. These can be served at any time throughout the tenancy.
They are primarily remedial, and focus on urgent repairs rather than financial compensation. These urgent repairs could revolve around structural or services, and cosmetic items like decoration are rarely included.
Within this schedule, tenants are generally encouraged to complete the works themselves. However, there are some cases where the landlord may be able to carry out the repairs and charge the tenant, should this be outlined in the lease provisions.
Final Dilapidations
As the name suggests, final dilapidations take place after the tenancy or lease has ended. This means that the tenant no longer will have the ability to carry out any work, so the only option available is financial compensation.
Final schedules are typically served shortly after lease expiry as to give a reasonable timeframe for the tenant to respond.
How Can Landlords Claim For Dilapidations?
When tenants fail to meet their lease obligations, it can very quickly turn into a nightmare for landlords. Through the dilapidation claims we’ve discussed, you can recover your costs, but success hinges on preparation and clear documentation.
For example, you should practice the following when making a claim:
- Maintaining a schedule of condition at the start of the lease
- Conducting regular inspections
- Ensure the accuracy of schedules of dilapidations
- Communicating clearly with tenants
- Offering tenants every opportunity to carry out required works themselves
How Can Tenants Protect Themselves in Dilapidation Claims?
Put simply, tenants can limit liability during dilapidation claims by understanding their lease obligations and keeping the property well-maintained throughout the tenancy.
However, there are other ways that they can keep themselves protected, including:
- Requesting a schedule of condition at the start of the lease and documenting any alterations or repairs
- Responding promptly to interim, terminal, or final schedules
- Maintaining records of works
- Seeking professional advice when needed
Get in Touch With Our Team to Arrange a Meeting With Our Experts
Disputes over dilapidations can be costly and time-consuming for both landlords and tenants, which is why you want to try and avoid them if you can. However, if disputes do arise, it helps to have someone in your corner who can support and guide you.
At Talbots Law, our commercial property team can guide both landlords and tenants through the dilapidations process. We are there to help safeguard your position and resolve disputes efficiently.
Contact us today on 0800 118 1500 or get in touch online to arrange a consultation. Let us help you remain protected and safeguard your position.
This blog was written by Daniel Malin, Associate & Marketing Manager, Sales & Marketing Team. The contents of this blog, or any other published by Talbots Law, cannot be considered as legal advice so you should take no action without prior consultation with a qualified solicitor or legal professional. The contents of this blog refers to the process in England and Wales.