Dilapidations Claim by a Landlord
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What is a dilapidations claim?
A dilapidations (dilaps) claim by a landlord is where they feel that you have not reached the requirements of the lease contract, known as covenants. The claim will initially relate to items of repair, decoration, alteration and reinstatement, statutory obligations within the lease, but if these obligations aren't met before the property is yielded up (given back) then further claims may be made for loss of rent, rates, etc.
Repairing covenants/obligations and full repairing leases
Your lease will have repairing obligations. Most modern leases are full repairing and insuring (known as FRI leases), which means that you have to fully repair them and insure them. The landlords dilapidations claim identifies what, in their eyes, are not up to the standard of repair set out within the lease.
In our experience most leases have a decoration covenant requiring redecoration at certain intervals, particularly at the end of a lease. The landlord may serve an interim dilapidation where this is not met, or a terminal (end) dilaps, where they feel hasn't been met. Equally, they may build an argument around the lack of redecoration as set out within the lease, being a cause for additional repair.
Alteration and reinstatement
Unless proper records are kept of how the property was originally and how it has been altered with the agreement of the landlord then they may require the property to be reinstated to its original configuration. When we say agreement with the landlord we don't mean verbally but we mean written, which may also incorporate drawings and specification of works and a written approval being given, or whatever the terms of the lease require.
A problem that we have come across several times is where the tenant feels that the property is more lettable in its present configuration that it was when they took it on, for example if they have added offices or a mezzanine floor. Put simply, this isn't the tenant's decision as to whether the property is more lettable, it is the landlord's decision. Remember it is his business to let out properties and therefore he should be more expert than the tenant in what is lettable (although it isn't necessarily the case). The landlord has the right, assuming that it is set out within the lease properly, to ask for the property to be returned to its original configuration.
This can be a very onerous clause and is present in most modern leases requiring the leaseholder/tenant to meet any statutory obligations, even if these are new and have been formed after the lease. Complying with the Disability Discrimination Act relating to access for the less-abled/disabled is a good example of a statutory obligation. There are many other examples, such as complying with fire regulations, etc.
What does yielding up mean?
Yielding up is simply the requirement to return the property in the condition set out within the lease. This may have further additional clauses over and above those already mentioned.
The dilapidations claim doesn’t stop there
All of the above once explained seem relatively self-explanatory, although the detail of each one can be argued over forever more and other things can also be added to the claim.
Some leases will have clauses relating to the professional fee costs incurred by the landlord in serving the dilapidations schedule and this should be identified as one of your potential future costs.
The landlord can also claim for many other consequential losses. The RICS (Royal Institution of Chartered Surveyors) Guidance Notes on Dilapidations give the following list (for a full list please read the guidance notes):
Legal feels in connection with the service of the schedule
Administration of the work envisaged by the schedule
Holding costs expected to be incurred before re-letting or sale, as the case may be
Loss of rent until the end of any works and during any additional marketing period required as a consequence
Insuring, security, energy, including costs reflected in the building works claimLoss due to the lack of service charges
Financial costs including interest
Preparation of the schedule (which we have already mentioned)
Surveyors feels (which we have already mentioned)
This is all of course dependent upon the specific lease.
A Section 18 valuation
Costs of the dilapidations claim are however capped by the Section 18 valuation. We are not certain whether this includes the consequential losses as well. We would be very interested to hear from any solicitors that have dealt with a Section 18 valuation and advise further.
We have produced a number of articles and book reviews on dilapidations, for more information go to: