Dilapidations is a phrase used to cover items of disrepair to a building. More particularly it's used by landlords of business leases to put tenants on notice that a property has fallen into disrepair or neglect and the landlord places an onus on the tenant to comply with its lease terms.
Dilapidations can be used in two scenarios:
The law surrounding dilapidations can be very complex and landlords and tenants should seek expert advice at an early stage.
The Property Litigation Association (PLA) first released a draft Dilapidations Protocol in 2002, which focused on a way to prevent exaggerated claims and to promote early settlement. It has been revised over the years following input from the Royal Institute of Chartered Surveyors (RICS).
Since approximately 2009, the PLA and RICS have been working with the Civil Justice Council in order to have a pre-action protocol formally adopted into the Court Rules. 'The Pre-Action Protocol for claims for damages in relation to the physical state of commercial property at the termination of a tenancy (the Dilapidations Protocol)' came into force on 1 January 2012.
The Protocol establishes a framework by which claims for dilapidations at the end of a lease should be notified, responded to and for exchange of valuation evidence. The aim of the Protocol is to encourage the full exchange of early information; to enable parties to agree a settlement of the dispute without Court proceedings; and to support effective management of proceedings where litigation cannot be avoided.
A claim for damages in lieu of compensation for dilapidations and wants of repair is limited by the actual diminution in value which should reflect the loss to the landlord. An important element in assessing the diminution in value is a valuation of the property 'in repair' and 'not in repair' having regard to the terms of the lease. The valuation is generally recognized as a 'Section 18 valuation'. The Section 18 valuation should be prepared by a chartered valuation surveyor to demonstrate the extent of the actual loss to the landlord's property value as a result of non-compliance of the lease terms.
A schedule of condition is a record of the condition of a property which should be attached to a lease from the outset. It can be commissioned by the landlord or tenant but in order to be effective must be agreed by both parties.
For landlords, the schedule of condition will ensure that the property is returned to the condition it was taken. For tenants, it can reduce liabilities and obligations to 'put in repair' at the end of a lease. In both cases, the record should limit the prospect of dispute during and at the end of the lease term.
We can act for landlords or tenants in the preparation of interim or terminal dilapidations schedules; defending a dilapidations claim and reducing a tenant's liability; and, preparation of a schedule of condition which will limit a tenant's liability from the outset of a lease.