Dilapidations

Question 1

What is the purpose of the dilapidations guidance note?

Answer 1

Provide a framework for understanding and managing dilapidations claims in the context of commercial leases.

Question 2

What is the definitions of dilapidations?

Answer 2

The breach of lease obligations concerning maintenance and repair of a property, typically assessed at the end of a lease.

Question 3

What does the dilapidations guidance note assess?

Answer 3

It outlines how to assess the condition of a property including determining whether breaches have occurred and quantifying the financial implications.

Question 4

What does the guidance note emphasize?

Answer 4

The guidance note emphasizes the importance of negotiation and settlement, encouraging parties to engage in discussions to reach amicable solutions before leading to litigation.

Question 5

Importance of documentation in dilapidations.

Answer 5

The guidance note highlights the need for accurate record-keeping and clear communication throughout the process including notices served and responses.

Question 6

Best practice for managing dilapidations

Answer 6

Regular property inspections, proactive maintenance.

Question 7

Role of Advisor in dilapidation claim?

Answer 7

Involves surveyors identifying or commenting on breaches of covenant and appropriate remedies.
They prepare schedules of dilapidations, quantified demands and respond, provide or comment on diminution valuation, provide valuation advice, negotiate with out parties with aim to achieve settlement.

Question 8

What is quantified demands in dilapidations?

Answer 8

A document that a landlord prepares to claim damages from a tenant for alleged breaches of a lease agreement. It’s the final claim a landlord makes after a lease ends and is usually based on a Terminal Schedule of Dilapidations. The quantified demand is the basis of the landlord’s claim to prove their loss. It also includes claims such as loss of rent, interest or fees.

Question 9

What is the tenant’s response to a quantified demand?

Answer 9

The tenant or their surveyor responds to the quantified demand with a covering letter or email and a Scott Schedule.

Question 10

Scott Schedule

Answer 10

A detailed response to a landlord’s Schedule of Dilapidations, which is a document that lists repairs and estimated costs for a property. A tenant or their surveyor can use a Scott Schedule to dispute a landlord’s claim if they believe it is unfair, excessive, or incorrect.

Question 11

Scott Schedule is a table that includes the following:

Answer 11

Claimant’s complaints: Each complaint is listed separately in the first column.
Cost estimate: The claimant estimates how much it will cost to fix each issue in the next column.
Defendant’s response: The defendant’s response is listed in adjacent columns.

Question 12

When can a schedule of dilapidations be issued by the landlord?

Answer 12

If the lease covenant relating to the property condition has been breached.

Question 13

Different roles of a surveyor?

Answer 13

Advisor, expert witness (give objective unbiased evidence), dispute resolver (appointed by private agreement between the parties)

Question 14

What is diminution valuation?

Answer 14

Diminution valuation is a legal term that describes the maximum amount of damages a landlord can claim in a dilapidations dispute. It’s a chartered valuation surveyor’s specialty to assess the impact of dilapidations on a property’s value and prepare a diminution valuation

Question 15

Diminution value cap

Answer 15

According to legislation, a landlord’s damages, or compensation, for dilapidations is capped at the lower of the Cost of the Remedial Works, or the Diminution in Value.

Question 16

Documentation for dilapidations

Answer 16

Copies of the lease, any sub-leases, scaled plans, licences or consents for alterations, reinstatement notices, agreement for lease, schedule of condition and photographs, inventories, any notices under Landlord and Tenant Act 1954, current and historic planning consent, statutory notices,

Question 17

Inspections in dilapidations

Answer 17

Surveyor should check with legal advisors before making access arrangements, consider terms of lease, read inspecting property guidance note, note down the general state of repair of properties in the locality (vacant, boarded up, refurbished), nature/condition of the location when the lease was granted.
Retain all site notes, photographs, videos, transcriptions.

Question 18

Schedule of dilapidation

Answer 18

Records breaches in covenant. This schedule contains details of documents, relevant clauses of the leases, the alleged breaches, remedy required, cost of remedy.
Costs should be obtained from appropriate sources e.g. price book data, competitive tender exercise, recent tender price info, QS advice, consultation with contractor.

Question 20

Dilapidation during term of lease

Answer 20

Surveyor should ascertain the remedy or remedies being persued by the landlord or tenant.
Remedies - damages (usually capped by dimunition in value)
Forfeiture - lease coming to an end, landlord has to serve notice under section 146 of Law and Property Act 1925.
Specific performance, entry to repair the works.
Entry to carry out work - Leases contain right for LL to enter the property without consent and undertake the works. Jervis v Harris clauses.

Question 21

Dilapidation at end of lease

Answer 21

Only remedy is usually damages.
Section 18 of Landlord and Tenant Act 1927 limits the damages recoverable for breaches of the repairing covenant.

LL also can’t claim damages if it can be demonstrated that the property was to be demolished or significantly altered shortly after the lease ended.

Question 22

Dilapidation claim tenant to landlord

Answer 22

Tenant needs to give the landlord notice of the breach. Notice should be in writing and same process as if you had a landlord to tenant claim.
Remedies:
Tenant may remain in property, temporarily vacate, sell their interest in property.
Tenant who remains in the property may claim inconvenience, discomfort, ill health, damage to personal belongings.
Tenant who vacates - cost for alternative accomodation.
Set off - deduction in rent and other sums paid to the landlord.
Tenant can rectify the issue themselves.

Question 23

Diminution valuation

Answer 23

Valuation prepared to assist the quantification of the landlord’s damages claims. The valuation seeks to identify the reduction in value of the property.
Required to assess the statutory cap on damages for disrepair Landlord and tenant act 1927.

Question 24

Break clauses

Answer 24

Leases contain clauses giving either the LL or tenant the right to end the lease before the contractual term without penalty.
usually conditional on the tenant or landlord complying with certain conditions.