- What Is A Schedule of Dilapidations?
A Schedule of Dilapidations, also known as a Dilapidations Survey or Dilapidation Report, is a list of Schedule of Works, to be undertaken by a tenant at lease end.
This schedule is usually requested towards the end of a lease, to identify any elements of the property which may have deteriorated during the lease period and require repair. It can also be commissioned at any point during a lease, which is an interim schedule.
Essentially, the purpose of a Dilapidations Survey is to ascertain whether any damage has occurred whilst the building premises has been occupied by the leaseholder, and to identify anything for which the leaseholder may be financially liable to repair.
- Why Do I Need a Schedule of Dilapidations?
A Schedule of Dilapidations has benefits for both landlords and tenants. For landlords, it provides a detailed schedule of any work that will need to be done before the lease expires. It identifies who is responsible for the completion of works.
The tenant is advised to independently assess lease end obligations within 12 months of expiry, to provide time for the initial schedule to be drafted but also for the collection of estimates and to consider undertaken works.
For the tenant, a Dilapidation Report provides a breakdown of what work they are required to complete before exiting the property. However, to obtain strategic advice in respect of the landlord’s claim early on can be valuable in reducing the claim and tenant’s exit costs.
Commercial tenants may also see taxation benefits from a professionally-prepared Dilapidations Report, as it demonstrates an accrued liability which is reflected on the company balance sheet.
As a landlord, if you should become concerned about the tenant’s upkeep of your property, you can prepare a Formal Schedule of Dilapidations. We will assess the property and will prepare a report based on our findings. This will outline what repairs need to be done, and the tenant will be advised of the financial and potentially legal consequences of failing to act upon the findings.
If you are a tenant or leaseholder, where dilapidations is a concern, we can defend against potentially erroneous or malignant property dilapidation claims by a landlord. In this regard, we will prepare an itemised response to the landlord’s claim, offer strategic advice and raise a technical argument to reduce the landlord’s claim and negotiate settlements.
- When Do I Need To Start Thinking About Dilapidations?
The issue of dilapidations should be considered before taking a lease. A chartered surveyor should undertake a survey to establish the condition of the premises, which will inform the prospective tenant as to any works that may need to be carried out, both now and later.
During the lease term, maintaining the premises regularly is key to avoiding potentially expensive issues later on. Recording the condition and layout prior to occupation is highly recommended.
- What If The Premises Are Already In A Poor State of Repair?
Regardless of the condition at the commencement of the tenancy, most commercial leases will require the tenant to keep the property in a decent state of repair. Without a specific agreement with the landlord to the contrary, the tenant will be required to correct existing defects.
Rather than agreeing with the landlord that the premises can remain in the poor condition in which it stood at the commencement of the tenancy, the tenant may alternatively negotiate a lower rent or premium to compensate for the cost involved in bringing the property up to scratch.
Another alternative is to agree with the landlord that the premises should be returned, at the end of the lease, to a comparable condition to that in which the premises were received at the start. If opting for this, ensure the premises are surveyed by a chartered surveyor at the commencement of the tenancy, and that the premises’ condition is recorded and attached to the lease as a ‘Schedule of Condition’. A solicitor should then vary clauses in the lease agreement to reflect these reduced obligations.
- When Is The Landlord Likely To Submit A Dilapidations Claim?
A dilapidations claim is normally not served earlier than three years prior to the end of the lease. Unless or until the tenant indicates that they will not be renewing the lease, the landlord is unlikely to serve a dilapidations claim.
- What Is The Difference Between A Dilapidations Schedule and a Photographic Schedule of Condition?
A Photographic Schedule of Condition is usually conducted at the beginning of a tenancy, before the tenant moves in. It comprises a factual record, including extensive photographic and written evidence of the state of every visual element within the property.
A Dilapidations Schedule, on the other hand, is issued towards the end of the tenancy or leasehold period, to record the condition and itemise repair items at the premises. In most cases, a Photographic Schedule of Condition will reduce a tenant or leaseholder’s dilapidations liability at lease expiry.
- What Is My Position When I Have Made Alterations To The Premises?
A tenant’s position regarding alterations depends entirely on the terms of the lease agreement and/or on any special licences granted by the landlord allowing alterations to be made. It is likely that, if a landlord has granted consent for alterations, the premises should be restored to the original state at the end of the lease.
Unless the landlord is satisfied that the alterations add value to the property, they will likely request the property is reinstated or a cost incurred by the tenant for that purpose. Notably, if neither the lease nor the licence for alterations allow the landlord the option to request reinstatement, the tenant will not be obligated to reinstate.
- Do I Have To Fully Accept The Landlord's Claim For Dilapidations?
A tenant should not accept a landlord’s dilapidations claim without taking professional advice from a chartered surveyor. A surveyor will assess the landlord’s claim and may be able to reduce figures and/or ascertain that certain items should not have been claimed for.
Sometimes, it may be that the landlord does not plan to repair the property at all, as there may be plans to alter the premises after the tenant has left, or to demolish the property altogether. Where this is the case, there would be a substantial legal defence. The landlord cannot claim for more than they have actually lost.
- What If A Compromise With The Landlord Cannot Be Reached?
If an agreement cannot be reached, a legal case can be raised. However, the process is slow and expensive for both landlord and tenant, both of whom will be keen to avoid it. Should this situation look likely, the tenant should consult their solicitor and chartered surveyor. The chartered surveyor is able to provide expert witness testimony in court, if necessary.
Mediation, expert determination or arbitration may be a viable alternative method of resolving such disputes.
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