Dilapidations
Dilapidations in simple terms are items of disrepair or defects which tenants are required to rectify or pay to have remedied under repairing covenants within their lease.
Reasons for needing dilapidations
Dilapidations' issues generally occur when a tenant is found to be in contravention of its leasehold obligations, and generally relate to breaches of reinstatement, repair, redecoration and statutory covenants.
A schedule of dilapidations records the alleged breaches of covenants and identifies appropriate remedies, which ultimately could form the basis of legal proceedings if neither party is able to reach an amicable settlement.
Process for dilapidations
- Once a lease has expired the landlord has 56 days to serve schedule of dilapidations.
- Landlord will appoint a surveyor to prepare a detailed schedule of dilapidations. The schedule of dilapidations is then served on the tenant by the landlord or their solicitor.
- The tenant will then likely to instruct a surveyor on their behalf to validate the claim. The tenant must then decide whether to undertake the works, during the lease, or agree a financial settlement with the landlord, after lease end.
- It can often be financially advantageous for the tenant to undertake some, or all of the works, but once the lease has expired, the tenant loses the right to do so and negotiating a claim for damages becomes the only solution.
Tenant’s obligations
- The condition of the property before lease commencement becomes largely irrelevant during dilapidations negotiations unless this is specially agreed and formally documents, in a schedule of conditions.
- A tenant has obligations within the repairing covenant of a lease
- The term ‘in repair’ is used within the repairing covenant and includes for the tenant to repair the property if it falls into a state of disrepair
- The standard of repairs required will depend on the length of term, age and location of the property.
- An obligation to keep in good condition can require works to be carried out even if there is no disrepair
- A covenant to keep the property in good repair and condition is more onerous than good repairs alone.
- An obligation to repair will not usually require the tenant to make improvements
Landlord's rights
- During the term of the lease, the landlord’s remedies include a claim for damages, forfeiture, re-entry for the landlord to repair and then re-charge costs to the tenant. Not all of the above remedies will be appropriate on every occasion.
- Claiming for damages is the landlord's only remedy once the lease has expired and it is subject to a number of limitations.
- If the tenant is in breach of the covenants set out within their lease then the landlord is able to recover the reasonable costs for undertaking the works plus loss of rent including service charge and rates for the period until the works have been completed.
For more information see the article below by the RICS
http://www.rics.org/Global/RICS-Dilapidations-consumer-guide.pdf