Dilapidations are breaches of repairing obligations in a lease; a leaking roof or broken window are obvious examples. Tenants often make the mistake of underestimating their repairing obligations and repair costs can be very expensive.
Before taking a tenancy it is important for a tenant to be aware of the extent of the obligations imposed in the lease. Broadly speaking there are two categories of repairing obligations. A “full repairing” obligation which imposes on the tenant a responsibility for carrying out or maintaining the costs of the repairs of the entire building (including the roof and/or foundations) regardless of the condition at the start of the lease. An “internal only” obligation imposes on the tenant an obligation to repair and decorate the interior. In that case the landlord often recoups the cost of repairing the exterior by levying a service charge.
Where there is disrepair the landlord will instruct his surveyor to prepare a notice setting out the disrepair, this is known as a schedule of dilapidations. The type of schedule depends on timing. A schedule served during the lease is an “interim” schedule. A schedule served in the last three years of the lease is known as a “terminal” schedule and a schedule served at the end of a lease is known as a “final” schedule. A final schedule differs from interim and terminal schedules in the following, crucial, way: Under a final schedule, as the lease has come to an end the tenant will not be able to carry out the repairs because he will no longer have any right of occupation. The landlord’s remedy is usually to bring a damages claim including not only the cost of repair but also additional losses such as loss of rent, service charges, rates etc.
The landlord can enforce repairing obligations against the tenant in three ways:
In practice the landlord will only carry out works himself at the end of the lease and then look to recoup the costs from the tenant.
There are ways which a tenant can look to reduce the amount of the landlord’s claim. The tenant should instruct a surveyor to negotiate down the schedule of dilapidations. There is also a legal limit on the value of a landlord’s claim, known as the “statutory cap on damages”. This varies depending upon whether the lease is continuing or at an end. There is also additional protection for tenants with more than three years left on the lease so in practice unless the disrepair is serious the landlord usually leaves disrepair claims until the end of the lease.
The best way in which a tenant can look to limit the dilapidation liability is by watering down repairing obligations in the lease before taking the tenancy, or limiting the repairs to the maintenance of the property in its existing condition, by including in the lease what is known as a schedule of condition.
We have extensive experience in advising both landlords and tenants on all types of dilapidations claims and remedies available to them or steps they can take to limit their liability. Advice is best given early before the parties enter into a new lease. We can also recommend specialist building surveyors, to both landlords or tenants, who can pursue or defend dilapidations claims and the resolutions available to them. We can also instruct Counsel to advise landlords and tenants on rights and liabilities to achieve the best solution to pursue or defend any dilapidations claim.