Legal and regulatory

Question 1

1. What are dilapidations?

Answer 1

Dilapidations is a specific area of law relating to breaches of a tenant’s lease obligations or covenants which may be either express or implied. A claim typically includes breaches of reinstatement, repair, redecoration, and statutory obligations and associated costs

Question 2

2. What is a dilapidations claim?

Answer 2

A common law claim for damages in respect of breaches of obligations or covenants within a lease between a landlord and a tenant.

Question 3

3. When can a claim for dilapidations be made?

Answer 3

A dilapidations claim can be made by the landlord against the tenant during the term (interim) or towards the end of a lease, or after the lease has ended (terminal).

Question 4

4. What is the role of the surveyor in the dilapidations process?

Answer 4

Advisor: Offer strategic advice in respect of making or defending a claim
* Obtain relevant information
* Inspect the premises
* Prepare a schedule of dilapidations / response and a Quantified Demand – must not exaggerate or underestimate claim
* Negotiate settlement of a claim on behalf a landlord / tenant

Expert Witness:
* A person whose level of knowledge in a particular field qualifies them to present their opinion about the facts of a case during legal proceedings.
* They must give objective evidence before a court / tribunal on particular aspects of the matters which are in dispute.

Dispute resolver:
* Appointment by private agreement or RICS Dispute Resolution Service

Question 5

5. What is a schedule of dilapidations?

Answer 5

A document that identifies breaches of relevant lease obligations, completed or proposed remedial works, and the estimated or actual cost incurred in remedying those breaches.

Landlord’s schedules are referred to as either Interim or Terminal depending on when they are served on a tenant during their term.

Question 6

7. What is a Scott Schedule?

Answer 6

A Schedule of Dilapidations with additional columns to enable the parties to set out their respective views.

Question 7

8. What is a Quantified Demand?

Answer 7

A document prepared for the purpose of and complying with Part 4 of the Dilapidations Protocol, typically incorporating a Terminal Schedule of Dilapidations. It sets out all aspects of the dispute and quantifies the damages being sought in respect of the breaches detailed in the schedule and any other losses incurred by the Landlord. It should also set out whether VAT applies.

Question 8

9. What costs may be included in a Quantified Demand?

Answer 8

• Loss of rent
• Rates liability
• Insurance, security, energy, and cleaning costs not already reflected in the Schedule of Dilapidations
• Loss due to lack of service charge recoupment
• Finance costs (including interest)
• Other fees of the surveyors (including fees relating to assessment of rent and diminution in value).

Question 9

10. What remedies are available for terminal dilapidations?

Answer 9

The legal remedy is typically a claim for damages if the breaches are not rectified prior to lease expiry.

Question 10

11. What cost are typically included in a summary page in a Schedule of Dilapidations?

Answer 10

• Cost of the remedial works
• Allowance for contractor Preliminaries
• Design and administration fees for the works
• CDM compliance fees
• Professional fees for preparation of the schedule
• Legal fees
• Statutory fees
• Allowance for irrecoverable VAT

Question 11

12. How do you typically go about estimating a claim for dilapidations / preparing a Quantified Demand?

Answer 11

I typically use the BCIS, Spon’s and in-house cost data. I prepare costings in sufficient detail to enable full understanding by the client, the other party, their advisers, the tribunal, etc. Where items of a specialist nature are to be included in the claim, I seek advice from the relevant discipline such as M&E Engineers or Cost Consultants.

Question 12

13. What should a surveyor do prior to endorsing a schedule of dilapidations?

Answer 12

Endorsement is a formal declaration of support. Before making the endorsement, the surveyor should ask the landlord to confirm in writing what its intentions are/were for the property and ensure that a written record of the reply is made and kept on file.

Question 13

14. What remedies are available for interim dilapidations claims?

Answer 13

• Damages
• Forfeiture
• Specific performance
• Entry to carry out the work

Question 14

15. What is a break clause?

Answer 14

A break clause is a provision in a lease which enables either the landlord or the tenant, or both, to terminate the lease prior to the contractual expiry date. Some clauses are conditional which require compliance before a break is deemed effective, for example:

• Vacant possession
• Notice
• Compliance with lease obligations

Question 15

16. What are the different types of offers?

dilaps

Answer 15

• Open offers: visible to a future tribunal.
• Without prejudice offers: not visible to a future tribunal.
• Calderbank offers (without prejudice save as to costs): visible only to tribunal that considers liability for costs, not the tribunal hearing the substantive dispute. Greater flexibility than Part 36 offers allowing the party making the offer to stipulate terms. If accepted, they create a binding contract between the parties.
• Part 36 offers: made in compliance with Part 36 of the CPR. Used to compel the other party to bring matters to a swifter conclusion by making a realistic offer to settle. Visible only to tribunal that considers liability for costs, not the tribunal hearing the substantive dispute (without prejudice). If a party does not accept a Part 36 offer, it risks being made liable to pay more in interest and/or costs on a judgment than if no offer had been made.

Question 16

17. What is meant by the term ‘Without Prejudice’?

Answer 16

Statements made on a “without prejudice” basis, in a genuine attempt to settle the dispute, will generally not be admissible in court as evidence against the person making the statement. The rationale for this principle is that it is in the public interest to encourage parties to settle disputes and avoid litigation wherever possible.

For example, if a Bank is owed a debt of €10,000 and legal proceedings have issued in respect of it (or are contemplated) and that Bank offers to accept a sum of €8,000 in a “without prejudice” letter, but the offer is rejected by the Customer, that Customer cannot subsequently produce the letter in court as evidence of a weakness in the Bank’s case, or as evidence of a claim that the Bank’s debt is truly only worth €8,000.

Question 17

18. What legislation is relevant to commercial dilapidations in England and Wales?

Answer 17

Fire Safety Order 2005
Health and Safety at Work Act 1974
Equality Act 2010

Law of Property Act 1925

Leasehold Property (Repairs) Act 1938

Landlord and Tenant Act 1954
Th Civil Procedure Rules 1998

Question 18

19. What relevance does S18 of the Landlord and Tenant Act have to dilapidations?

Answer 18

Limb 1: Diminution of the landlord’s reversionary interest
* The amount claimable by the landlord is capped to the diminution in value.
* S18 valuation requires one valuation in repair and one valuation in the current state of repair.

Limb 2: Supersession
* No damages are payable if the building is to be demolished or structural alterations will be completed to as to render the repairs valueless.

Question 19

20. How do you assess the required standard of repair?

Answer 19

Dowding and Reynolds recommend a 5-point test:
1. Is the item demised?
2. Has there been damage or deterioration from a former state?
3. Does the item fall below the required standard of repair?
4. What is the required remedial work?
5. Fact and degree test – is what is being demand an act of repair and not something beyond that?

Question 20

21. What is the difference between a fixture and a chattel?

Answer 20

Chattels are items of personal property that are identifiable and movable. Fixtures are items that are permanently attached or fixed to real property. A chattel can become a fixture if it has been affixed to the land and it cannot be removed without causing damage.
Holland v Hodgson – degree and purpose of annexation test.

Question 21

23. What is the purpose of the Dilapidations Protocol?

Answer 21

The aim of the Protocol is to facilitate early exchange of documentation to enable surveyors to fully understand the claim, and ultimately to settle before court proceedings. It sets standards for the content of the claim, correspondence, and the conduct of pre-action negotiations.

Question 22

24. What are the different timescales that must be observed under the Dilapidations Protocol?

Answer 22

The Protocol suggest a landlord should have served the Schedule of Dilapidations on a tenant within 56 days of lease expiry. The tenant then has 56 days to respond. Thereafter, the respective surveyors should meet on site to discuss the claim and seek to agree as many of the items in dispute as possible.

Question 23

25. What recourse is available if the processes outlined in the Dilapidations Protocol fail in resolving a dilapidations dispute?

Answer 23

The Protocol encourages Alternative Dispute Resolution to settle dilapidations rather than litigation. This might include use of the RICS Dispute Resolution Service: Dilapidations Scheme where an Independent Expert is appointed to make their own investigations and will rely on personal knowledge and experience to reach a binding decision.

Question 24

26. What are the different ADR procedures?

Answer 24

• Negotiation: Where the parties work together to reach an agreement. No third party is appointed. Decision not legally binding – meaning it cannot be enforced by the courts.
• Mediation: Jointly instructed neutral party that assists with communication between the parties to the dispute but will generally not offer opinion or assessment (facilitative only). Decision not legally binding.
• Conciliation: Jointly instructed conciliator will evaluate the parties’ cases and make recommendations based on his or her view (evaluative only). Decision not legally binding. Example:
• Adjudication: Jointly instructed neutral party/parties that is a specialist in the field. Decisions are binding unless and until they are revised by arbitration or litigation. Generally, adjudicators do not have the power to award costs (other than their own fees and expenses).
• Arbitration: is a formal and binding process where the dispute is resolved by the decision of a nominated third party, the arbitrator. Arbitrators have the power to ascertain facts, rather than just listen to submissions, and to order costs.
• Expert Determination: a process where parties a third party with knowledge of the matter to reach a decision on the matter. The decision is binding unless the parties agree otherwise. More suited to where the issues are technical, rather than legal. For example, RICS Dilapidations Scheme.
• Litigation: the courts. When all ADR mechanisms fail.

Question 25

27. How is a claim for dilapidations negotiated?

Answer 25

In accordance with the Dilapidations Protocol. This facilitates the early exchange of information, recommends the use of a Scott Schedule, and encourages the party to jointly inspect the premises to agree the matters in dispute.

Question 26

28. How is a Schedule of Condition used in dilapidations disputes?

Answer 26

A Schedule of Condition provides a factual record (including detailed photographs) of the condition of a property. They can be used as a benchmark against which the repair and condition of a property can be assessed, which may have the effect of limiting a tenant’s liability.

Question 27

41. What are the Building Regulations?

Answer 27

The Building Regulations are made under powers provided in the Building Act 1984 and apply in England and Wales. Building regulations set standards for the design and construction of buildings to ensure the safety and health for people in or about those buildings. They cover for example the structure of the building, fire safety, energy efficiency, and the provision of sanitation.

Question 28

42. What is deemed to constitute Building work under the Act?

building act

Answer 28

`Building Work’ is defined in Regulation 3 of the Building Regulations as:

• Erection or extension of a building
• Installation or extension of a service or fitting that is controlled under the regulations
• An alteration project involving work which will temporarily or permanently affect the ongoing compliance of the building, service or fitting with the requirements relating to structure, fire, or access to and use of buildings.
• The insertion of insulation into a cavity wall
• Underpinning of foundations

Question 29

44. Is in mandatory to comply with the information contained in Approved Documents?

Answer 29

There is no obligation to adopt the solutions presented in the approved documents - the building regulations can be satisfied in other ways. If the Approved Document is not followed the onus is then on the designer to demonstrate compliance by reference to British Standards, etc.

Question 30

45. What is the difference between Building Regulations and Approved Documents?

Answer 30

The Building Regulations are Statute and must be complied with. The Approved Documents are technical guidance on how to comply with the Building Regulations and are not mandatory.

Question 31

47. When are consequential improvements triggered for non-domestic buildings under part L of the Building Regulations?

Answer 31

Consequential improvements: additional work to be undertaken to make an existing building more energy efficient (comply with Part L) when certain types of building work are proposed.

They are required when a building is over 1000sqm and the works involve significant extension/refurbishment and/or when extending or replacing a fixed building service. If this is the case, then 10% of the value of the works should be spent on improvements to ensure compliance with Part L.

The key is that it is reasonable, and the payback will be within 15 years. For example, if the remaining life of the building is less than 15 years it would be economic to carry out only improvements with payback periods within that life.

Question 32

87. What are the key points in the Control of Asbestos Regulations 2012?

Answer 32

• Legal duty to manage the risks from asbestos in non-domestic buildings.
• Separates work into licensable, notifiable non licensed works (NNLW) or non-licensed work.
• Anyone carrying out work on high-risk materials has a legal duty to obtain a licence.
• Training is compulsory for workers engaged in asbestos removal.
• Employers must risk assess their employee’s exposure to asbestos prior to carrying out work.

Question 33

91. What are your firm’s policies in relation to asbestos?

Answer 33

• Testing of asbestos must be undertaken by UKAS accredited analysts accredited to BS EN ISO/IEC 17020 and ISO/IEC 17025.
• All work to remove or remediate asbestos must be undertaken by a licensed contractor, whether the works is licensed or not, to avoid the consequences of misinterpreting the different categories of work.

Question 34

92. What are the different types of work to asbestos?

Answer 34

• Non-licensed work: sporadic and of low intensity work on lower-risk asbestos materials and products. Examples include drilling textured coatings, cleaning up small quantities of loose/ fine debris containing ACM dust, and encapsulation of ACMs in good condition.
• Notifiable non-licensed work: where materials that are normally regarded as non-licensed have an increased risk of fibre release during removal. Operatives will need to be suitably trained and be able to demonstrate competency and be under medical surveillance (every 3 years). Records will need to be kept for 40 years. Examples include asbestos cement products (e.g., roof sheeting) where materials may be broken up.
• Licensed work: Not sporadic and of low intensity. Examples include works to asbestos coatings, insulation, and AIB where works are not short duration.

Question 35

93. What is the period of notification prior to any notifiable asbestos removal works?

Answer 35

All licensable work must be notified to the appropriate enforcing authority using the ASB5 form at least 14 days before the work starts.

Where non-licenced work becomes notifiable non-licensed work (i.e., if the asbestos is in a poor condition before work starts or it is likely to deteriorate during removal) notification can be made online using the ASB NNLW1 at any time before the work starts.

Question 36

94. What are the procedures to follow in the event that asbestos is disturbed?

Answer 36

• Refer to HSE em1 asbestos essentials information sheet.
• Stop work immediately and put-up signage to ensure no one enters the area.
• Report the problem to whoever is in charge.
• Have sample tested.
• If not asbestos, work can continue.
• If asbestos, apply the appropriate controls using a licensed contractor, if required.
• If lower-risk asbestos and fibres are firmly bound, generally does not require a licenced contractor.
• Update asbestos management plan

Question 37

95. What is a hazardous waste consignment note?

Answer 37

A hazardous waste consignment note (HWCN) is a document that details the transfer of hazardous waste from one person to another. It is a legal requirement for every removal job for any type of asbestos containing materials as evidence of correct disposal.