Schedule of Dilapidations
Allcott Commercial offers professional dilapidations survey services by RICS chartered surveyors, acting either for the landlord or for the tenant. Our experienced team specialises in both the enforcement and defence of commercial, industrial and retail dilapidations claims. With an excellent understanding of the Dilapidations Protocol, our surveyors are able to advise on all aspects of the dilapidations process.
What is a schedule of dilapidations?
Landlords can instruct a surveyor to prepare a schedule of dilapidations either during a lease (interim dilapidations) or at the end of the lease period (terminal dilapidations). These are normally carried out by a chartered building surveyor, and as such will follow the RICS dilapidations guidance, in addition to the Dilapidations Protocol legislation.
The surveyor will carry out a dilapidations survey to assess the condition of the property. They will then prepare a schedule of dilapidations report detailing their observations. The report will discuss any breaches to the lease covenant and will note the type and costs of repair works that are needed to restore the property to the condition agreed at the start of the lease. If a schedule of condition was prepared and attached to the lease, this will be used by the surveyor to assess how the property has been altered during the term of the lease.
For landlords, dilapidations ensure that they can recoup costs for remedial works required as a result of breaches of covenant by tenants. For tenants, surveyors can save them money by supporting a defence against the landlord’s dilapidations claims if the dilapidations served are disproportionate, inflated or simply incorrect.
Tenants are often unaware if their lease requires them to redecorate the property at lease termination regardless of the state of the property when the lease commenced. They are also often unaware of clauses relating to undoing any alterations that have been made, and returning the property to its original state. For this reason, instructing a surveyor with comprehensive knowledge of the legislation around dilapidations and the experience needed to accurately interpret a lease can help both landlords and tenants resolve negotiations quickly and fairly.
Most lease covenants require the tenant to pay for schedules of dilapidations and any enforcement actions. Dilapidations are very much a standard process when commercial leases are coming to an end.
Dilapidations surveys for landlords
Dilapidations protect landlords by helping to ensure that the tenant sticks to the terms of their lease and returns the property in a fit state to re-let. It is not unusual for there to be dilapidation claims at the end of a lease; these can be fairly extensive if the lease has been lengthy.
Rather than wait until the end of a lease to consider dilapidations, landlords are advised to make regular inspections. If it appears that considerable repairs are likely to be needed, landlords can serve an interim schedule of dilapidations. The advantage of this is that it gives the tenant plenty of time to undertake the required repairs, and landlords are more likely to be able to re-let or sell the property quickly after the previous tenant has left. An interim dilapidations also offers some protection against tenants going insolvent – at least some of the works are likely to be paid for or completed before the end of the lease.
Once a landlord has received a dilapidations survey report from a chartered surveyor, they can make a dilapidations claim against the tenant for any breaches of the contract. Landlords should however be aware that there are restrictions on the value of dilapidations that can be claimed. It cannot be more than the amount that the value of the property has decreased as a result of being in a state of disrepair (the diminuation valuation). In addition, if the landlord is planning works on the property that would render the repairs irrelevant or unnecessary, then a claim cannot be made for those repairs.
It is not unusual for tenants to dispute the dilapidations and instruct their own surveyors if they feel the dilapidations claims are incorrect or unjust. Our commercial surveyors have experience acting for both landlords and tenants, and specialise in preparing thorough, evidenced dilapidations reports that are less likely to lead to disputes and negotiations. If there is a dispute, our surveyors are experts in dilapidations negotiations and can support you throughout the process.
Dilapidations surveys for tenants
At the end of a lease, tenants are normally liable for the costs of their landlord instructing a chartered surveyor to carry out a dilapidations survey and prepare a schedule of dilapidations, and for the costs of any repairs that are needed to reinstate the property to the condition stated in the lease covenant. Dilapidations claims can be several thousand pounds and it can therefore be quite challenging for tenants to meet the costs.
If any part of the dilapidations claim served seems to be excessive, incorrect or unfair, a chartered surveyor can carry out an extended schedule of dilapidations (known as a Scott schedule) on the tenant’s behalf, to allow them to dispute the claims. A surveyor can also advise tenants part-way through a lease to help them understand their likely liabilities and how to minimise costs. Sometimes, an interim schedule of dilapidations is specified in the lease. These dilapidations survey reports are produced part-way through a lease and protect both landlords and tenants by ensuring everyone knows the likely reinstatement works that will be needed and the associated liabilities.
Tenants may decide to carry out the repair works themselves to avoid a large monetary claim. However, landlords often prefer a monetary settlement rather than relying on tenants to instruct the works. This often leads to negotiations, with a reduced monetary value often agreed between the tenant and landlord, rather than the tenant arranging the remedial works themselves.
The best way to avoid costly dilapidations at the end of a lease is to make sure that a schedule of condition is prepared at the start of the lease. This provides a snapshot of the exact condition of the property at the start of the tenancy, and can therefore be used as evidence for disputing a dilapidations claim. A pre-acquisition survey is also advisable if the lease requires tenants to keep the property in a full state of repair. A surveyor will often review your lease as part of the survey to help tenants understand exactly what will be expected of them in terms of repairs and maintenance.
Allcott Commercial’s surveying services
We offer strategic advice on liabilities and are able to advise on appropriate tactics to be adopted towards the end of a tenancy. Our experience allows us to minimise dilapidations claims when defending a tenant and maximise settlement returns when acting on behalf of Landlord. Our commercial building surveyors are experts at interpreting lease covenants and applying them to dilapidations surveys.
- Landlord Services – Strategic portfolio reviews. Assessment, preparation and negotiation of interim and terminal dilapidations claims.
- Tenant Services – Liability assessments, scheduling and monitoring of compliance works, defence and negotiation of interim and terminal dilapidations claims.