The term dilapidations refers to a property’s state of disrepair where there is a legal liability for the condition of disrepair. This legal liability usually arises from express covenants contained within a lease. However, it may be a consequence of the law of tort or an implied contract.
Therefore, it is only when this landlord/tenant relationship ends that attention will focus on any dilapidation issues with the building. Unless the parties to the lease have had the foresight to consider a dilapidations procedure well before the end of the tenancy, this is very often the starting point for a dilapidations dispute.
A schedule of dilapidations records the works required to be done to a property, so it equals the state of the property when the tenant took up residency. This should have been put in if the tenant had complied with its covenants or obligations contained within the lease of the property.
When a tenant yields up the property, they simply return it to the landlord at the end of the lease and have removed all fixtures and fittings. This clause is key to outlining what is required of the tenant before they yield their tenancy of the property.
There are two types which can be served at different times during and after the tenancy:
A landlord should follow a procedure, the schedule must also specify:
The Royal Institution of Chartered Surveyors issues guidance on Dilapidations and gives practical advice to surveyors. This entails how to prepare, serve and respond to dilapidations claims, both before and after the commencement of proceedings.
Dilapidations are unique to the UK and are enforceable in a court of law. Clearly, a landlord will interpret disrepair in an entirely different way to a tenant and the legal interpretation of lease clauses can vary from case to case.
The state of the property market is key to the approach and outcome of a dilapidations claim. It also depends upon whether the demand for such property space is strong or not.
In weak market conditions:
In strong market conditions:
This provides a statutory cap for damages, by calculating the value of a landlord’s loss on account of the breaches of lease covenant. It is otherwise known as the ‘diminution in value’ of the landlord’s interest.
The Dilapidations Protocol was formally adopted by the Court Rules on 1st January 2012 and is now Law in England & Wales. The aim of the Protocol is to ensure that a claim is reasonable and understandable, in hope of reaching a settlement before court proceedings are issued. Where litigation cannot be avoided, then the Protocol facilitates the efficient management of the process.
The Pre-action Protocol: This is produced by the Property Litigation Association (PLA) in consultation with the Royal Institution of Chartered Surveyors (RICS). It should be used at the expiry of the lease term in all damage caused by breaches of a tenant’s repairing obligations.
The Courts: The Protocol is now treated as the normal and reasonable approach to pre-action conduct by the courts. Non-compliance might bring sanctions against the party concerned, so it is essential that surveyors, landlords and tenants understand the implications of dilapidations fully before making a claim.
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