Inspection Flashcards
1
Q
What are dilapidations?
A
- Refers to breaches of contract relating to the condition of a leased property and often relates to breaches of repair, redecoration, reinstatement and statutory covenants.
2
Q
What is a schedule of dilapidations and what is typically contained on a schedule of dilapidations?
A
- A schedule of dilapidations records alleged breaches of covenant by the tenant and identifies appropriate remedies and associated costs.
- A schedule of dilapidations will normally include item number, covenant number or identifier, alleged breach, remedy required and associated cost.
3
Q
Outline the different types of dilapidations?
A
- Interim dilapidations are issued during the course of the lease up to three years before lease expiry.
- Terminal dilapidations are issued within the last three years of the lease.
- Final dilapidations are issued after the lease has expired.
3
Q
What is a quantified demand?
A
- A quantified demand records the landlord’s full dilapidations claim.
- The quantified demand will include the total cost detailed on the schedule of dilapidations as well as any additional costs such as professional fees associated with preparation of the schedule, legal fees associated with service of the schedule and consequential losses.
4
Q
What are consequential losses?
A
- Additional losses incurred by the landlord as a result of the tenant’s breaches.
- Consequential losses may include; loss of rent, loss of service charge, void rates, temporary storage costs, temporary accommodation costs.
5
Q
What is the full name of the dilapaidations protcol?
A
Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy
5
Q
5) What is a Scott Schedule?
A
- A schedule of dilapidations with additional columns to enable both landlord and tenant to record their respective views.
- The document can be utilised during dilapidations negotiations.
- The document can be utilised to record negotiations between both parties by the courts.
6
Q
Are there any limits on damages claims for breaches of repair covenants?
A
- Section 18(1) of the Landlord and Tenant Act 1927 limits the damages that can be recovered for breach of repair covenants.
- In accordance with limb 1, damages shall not exceed the amount by which the value of the reversion is diminished owing to the breach of repair covenant.
- In accordance with limb 2, damages cannot be recovered if the landlord intends to undertake demolition or alteration works that would render the repair work valueless.
6
Q
What is meant by the term supersession?
A
- Supersession refers to the fact that damages for dilapidation works cannot be recovered if the landlord intends to undertake demolition or alteration work that would render the repair work valueless.
- Similar concept as that detailed within limb 2, section 18(1) of the Landlord and Tenant 1927 but applies to all breaches including reinstatement, redecoration and statutory obligations.
7
Q
What is your understanding of basic remedial work, grander remedial work and supersession
A
- Basic remedial work refers to the most economical method of undertaking the dilapidations works that should have been undertaken by the tenant (such as replacing a damaged mineral fibre suspended ceiling on a like-for-like basis).
- Grander remedial work refers to a more expensive method of undertaking the dilapidations works that should have been undertaken by the tenant (such as replacing a damaged mineral fibre ceiling with a metal pan suspended ceiling).
- In such situations, the landlord may be able to claim the cost of the basic remedial works from the tenant which can then help fund the grander remedial works.
- However, such actions may be viewed as supersession if it can be proven that the landlord’s intentions and market demands would have meant the grander remedial works would have been undertaken even if the tenant had complied with their lease obligations fully (the landlord would have replaced the mineral fibre ceiling with a metal pan suspended ceiling even if the tenant had maintained and kept the ceiling in repair).
8
Q
What remedies are available to the landlord during the term?
A
- Damages
- Forfeiture (lease comes to an end).
- Specific performance (court orders tenant to undertake certain work such as repair works).
- Entry to carry out work (sometimes referred to as Jervis v Harris clauses and allow the landlord entry without consent of the tenant to undertake works the tenant should have undertaken.
9
Q
Outline the ways in which a dilapidations claim during the term can be limited?
A
- Firstly, claims for damages for breaches of repair covenants can be limited by Section 18(1) of the Landlord and Tenant Act 1927. In accordance with limb 1, claims for damages shall not exceed the amount by which the value of the reversion has diminished owning to the breaches of repair covenant.
- Secondly, claims for damages and forfeiture can be limited by Leasehold Property Repairs Act 1938 if the lease was granted for a term of seven years or more and has three or more years left. The landlord to serve a section 146 notice under the Law of Property Act 1925 which refers to the Tenant’s right to serve a counter-notice under the Leasehold Property Repairs Act 1938. If the tenant serves a counter-notice within 28 days, the landlord cannot claim damages or forfeiture without permission of the court.
10
Q
What is a Jervis v Harris clause and what are the risks associated with improper use of the Jervis v Harris clause?
A
- An alternative name for a clause contained in some leases which allows the landlord entry to carry out work which should have been undertaken by the tenant.
- This is one of four remedies available to the landlord for dilapidations served during the term.
- Improper use of the clause by the landlord, such as failing to give the tenant adequate notice, can result in counterclaims against the landlord for trespass and loss of quiet enjoyment.
11
Q
If the landlord uses the Jervis v Harris clause to undertake required works, can he claim the associated costs from the tenant?
A
- The landlord’s costs may be recoverable as a debt but this is dependent on the wording of the Jervis v Harris clause within the lease.
- The limitations on damages associated with the Landlord and Tenant Act 1927 and the Leasehold Property Repairs Act 1938 are anticipated not to apply in this situation.
12
Q
Is VAT chargeable on a dilapidations claim?
A
- VAT cannot be charged on dilapidations claims as the payment of dilapidations damages is not a ‘taxable supply’ for the purposes of VAT.
- However, a landlord may be able to claim ‘compensation in lieu of VAT’.
- Landlord may be able to claim ‘compensation in lieu of VAT’ if the building is exempt from VAT as the landlord cannot offset VAT incurred in undertaking the dilapidations works against VAT paid by the tenant as part of their rent.
