Dealing With The Dilapidations Claim

Where A Schedule of Condition

Was Not Prepared Originally

If you would rather chat to a specialist chartered surveyor regarding dilapidations

claims then phone us to have a friendly free chat on 0800 298 5424.

Dilapidations are as certain as death and taxes for a leaseholder

Whether business is going well and you have decided to expand and move into a new business premises, or business is not doing well and you have decided to call it a day, or even if you have successfully got to the age of retirement and move out of your leased property the only thing that is certain, as we have mentioned, other than death and taxes is that dilapidations will be served upon you, often known as the Terminal Dilapidations Schedule.

Terminal dilapidations schedule

To many business owners this will come as a surprise, particularly if they have had a good relationship with the landlords over the years. In fact we would go as far as to say that even with a good relationship with the landlord things will change a great deal once you have decided to leave the property. The landlord puts on his investor hat (remember the landlords are business people to) and thinks I now need to re-rent the business premises and to do that I need to have the property in as good a condition as possible to make it very rentable. You will no doubt be aware of the competition in the area. If the market is good and strong and he feels he has little to worry about on re-renting and he may well be relaxed about dilapidations. If the market is hard and he feels he may have difficulty re-renting the property then he may take a much firmer stance. However, we generally find that most landlords will use a specialist chartered surveyor dealing with dilapidations claims who will stick to the letter of the law, or in this case the letter and words of the lease.

What is a dilapidations claim?

In its simplest form, a dilapidations claim is a list of building work that is required to be carried out to bring the property back up to the standard within the lease. Note that we say within the lease and not the condition the property was in when you moved in. We have, in the past, come across business owners who are horrified at this proposition who argue that when they moved into the property it was in a very poor condition and that the business owner, with the alterations and amendments, has made the property far better than it was originally. Nevertheless, much to their shock a Dilapidations Notice is served. We would emphasise this is because the Dilapidations Notice is making a claim against what the property should look like compared to the lease, not the condition that the business owner took the leasehold property on in.

Dilapidations notice served by a specialist chartered

surveyor

As mentioned, most landlords use specialist chartered surveyors to serve dilapidations claims (that's why you need a specialist chartered surveyor to fight the claim). The chartered surveyor will have no knowledge of the history between the landlord and the leaseholder, he will simply look at the conditions within the lease and require that you turn the leasehold property back into that condition. In this sense it is very similar to hiring a car on a rental. You would expect if you hired a blue BMW, and even though you didn't like blue, you would not return it having re-sprayed it in red. This is exactly what the landlord is after with a lease, i.e. the property being returned to the standards set out within the lease. If you wish to return it in any other condition other than what is in the lease then you need to say so.

Let us first consider how a specialist chartered surveyor looks at the dilapidations claim. When he is appointed by the landlord he has no past knowledge of what the business premises looked like when taken on. As most leases today are commonly full repairing and insuring he will simply prepare a list of all defects in the property.

Full repairing and insuring leases, tell me more

A full repairing and insuring lease means exactly that. You have full responsibility for the repair and insurance of the property. In addition to the repair responsibility there is normally a redecoration covenant, which means there is a requirement within the lease to redecorate periodically and normally at the termination of the lease.

Reinstatement covenant within the lease is used in the dilapidations

Usually there is also a reinstatement covenant. This is a requirement to reinstate the premises to how they were when you moved in. Many business owners will be somewhat surprised that the landlord requires them to undo many of the “improvements” that they have made, as these improvements they assume, and assure the landlord or landlord's surveyor, will add value to the rental. This is normally only in the eye of the beholder and even with negotiation, in our experience, most landlords require the business premises to be returned back to how it was at the start of the lease.

We have over the years seen some rather unusual requests to reinstate the property to its original condition. One of the most common occurrences is the removal of a mezzanine floor. This is a floor that's added where there is suitable roof space, and often is the first stage in expansion of a company, used as a storage area or even for office space (we are here looking at industrial units). Most business owners are very surprised when they are asked that this be removed. We can only think it is because the landlord does not wish to set a precedent, or even have the time to consider each case on its merits and individually.

Schedule of Condition

Just like when you hire a car, the car company will usually do a check of the condition of the car using a outline sketch and ticking and crossing where there are/aren't marks and requiring you to bring the car back in that condition. This can also be carried out on a property and this is known as a schedule of condition. It does involve the leaseholder having the forethought to carry this out at the start of the lease. Also of course, there will be a cost involved, but as chartered surveyors we would say (although we know we are biased) that it is money well spent!

Will a good relationship with the landlord help me with the dilapidations claim?

We would comment that the answer is possibly yes, but only so far. A good relationship will help you with the dilapidations claim as it is always best to get on with your landlord. We have added the but because it is very important to remember that your whole relationship with the landlord changes once you stop paying them rent. If you look at their (the landlord's) business they are now no longer gaining an income from you and indeed will be losing money if they are not careful and therefore be looking to the future where they need to gain a rental income from the business premises. They will therefore naturally want the premises back in as good a condition as legally they are allowed to have and this is the position the dilapidations claim is trying to put them in. Whether you have had a good relationship or not they have to look out for their future business interests.

I have a bad relationship with my landlord, will this affect my dilapidations claim?

Again, we would answer yes, but, and again we would say it is a good policy to always get on well with your landlord (in fact it is good policy to always get on with as many people as possible), but in this case the lease does work in your favour as it sets out a standard for which property should be maintained to and is not subject to how well or not you get on with the landlord.

The landlord won't deal with me on the dilapidations claim, he refers me to his dilapidations surveyor

This is very common with landlords, particularly the larger landlords, as they don't have the time or the skill and knowledge to be involved in the dilapidations claims process. We would, however, recommend that you write to your landlord to clarify exactly what authority the surveyors have. This can range from an in-house surveyor having the authority to agree a dilapidations claim, usually up to a certain financial limit, to a third party dilapidations surveyor who will have to report back and take the opinion of the landlord/property owner. We would add that this arms length transaction works very well as landlord's surveyor doesn't have the emotional involvement that you may have with the property and the issues.

What will happen if I don't carry out the dilapidations work?

Several things could happen and one extreme is that you could be taken to court and damages won for the non-conformance of the contract, or in a best case scenario, the landlord could decide that it is easy enough to rent the properties and therefore he will rent them. However, be aware that he can also make a dilapidations claim against you.

What if I only do part of the dilapidations work?

Again, this could result in a court hearing, as you have breached the contract. Equally you could argue that you carried out works that made the property rentable and that it won't affect what is known as the diminution in value.

What is a section 18 valuation or diminution in value?

 We refer you to our articles specifically on this specialist area.

Should I just do all the dilapidations works?

Whilst dilapidations are meant to be an interpretation of the work you are required to carry out in accordance with the lease, it is only an opinion and as such the opinion can be wrong or errors can be made. We feel it is only a very unwise person that would carry out all the dilapidations work; there is nearly always room to negotiate and discuss items.

Landlords make a percentage of payment

This is more common than you think. Where the landlord agrees that, for example, part of the redecoration is your responsibility, but that the premises would look better if all walls were redecorated, he will then think of ways to make a contribution to this cost. It can be as simple as off-setting against the other building works that are required in the dilapidations. What is difficult is trying to agree a suitable price for it.

What is a schedule of condition, how will it protect me?

A schedule of condition is a picture in time of the condition of the property when you took on the lease. Many landlords will refuse to accept these being attached to the lease but we would always recommend that you negotiate hard to get a schedule of condition attached, or have one carried out and forwarded, by recorded delivery by your solicitors, leaving a copy safe for yourself for that day when you do come to leave the property. This is a very good basis for negotiating on and could save you a lot of money.

We have produced a number of articles and book reviews on dilapidations, for more information go to:

Information on Dilapidations

If you need help and advice with regard to leases, dilapidations, schedules of condition, dilaps claims, Scotts Schedules or any other matters please call 0800 298 5424 for a friendly chat. Please note we are independent chartered surveyors.

If you would like Dilaps Help then please visit our www.DilapsHelp.com website and for Disputes go to our Disputes Help site www.DisputesHelp.com .

We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

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