Dilapidations and disputes over repair obligations are often one of the most problematic areas with regard to leasehold premises. Landlords will usually pass responsibility for maintaining and repairing premises on to their tenant. When negotiating a lease a well advised tenant will look to reduce this liability especially where the property is already in a poor state of repair.
This blog gives a brief summary of both landlord and tenant responsibilities and how surveyors can be used to provide advice and support.
The Lease Agreement
Tenant’s repairing obligations are usually drafted in one of two ways:
A full repairing liability where the tenant covenants to maintain the property. This could be defined in the lease as the whole building or only part of it if it is within a larger building with a shared tenancy.
Alternatively there may be a limitation on repair liability by reference to a schedule of condition which will be agreed by the parties and/or their surveyors. The schedule of condition provides very useful evidence regarding the condition of the property before the lease is entered into. If the condition of the property is of a particular concern, then this can be invaluable when trying to negotiate a dilapidations claim later down the line.
Analysing the repair clause
The notion of “repair” implies an obligation on the tenant to maintain the property with reference to the age and nature of the property. The general principle is that a tenant is not required to give back something which is “wholly different in character or nature to what it has been let”. Often in a full repairing lease the tenant covenants to “put and keep the premises in repair”. The additional obligation “to put” requires the tenant to do more than simply repair the premises and instead requires the tenant to put the premises in a good state of repair and condition even if they are not already in that state. In such circumstances it is especially important to obtain a survey.
What are dilapidations?
The term dilapidations does not in itself refer to the property being run down. There must be a state of disrepair and a legal liability for the condition of disrepair. In addition the state of disrepair must cause one party to suffer financial loss. A tenant would not be liable for dilapidations unless there is a breach of the repair obligations in their lease.
A landlord may serve a schedule of dilapidations on his tenant at different stages of a lease term:
- A schedule served during the term of a lease is known as an interim schedule.
- A schedule served within the last two years of the term is a terminal schedule.
- A schedule served at or after the end of the term is a final schedule.
An interim or terminal schedule will specify both the disrepair alleged by the landlord and the remedial work which the landlord requires the tenant to undertake. A final schedule is different as while it still contains details of the alleged breaches the tenant will have left the property and will no longer be able to carry out the works. A figure for the works will be agreed instead. This figure can include not only the costs of doing the remedial works but also loss of rent, service charge or rates for any period during which the property is off the lettings market, professional fees and VAT.
How can a surveyor help you?
If you have recently received a dilapidations claim from your landlord then you should act relatively quickly. A surveyor with dilapidations experience can help prepare a reply to the claim and negotiate a reduction in the amount claimed.
If you are a landlord and think your property is not in the condition it should be under the terms of the lease then you should consider whether you should be making a dilapidations claim against your tenant. The first port of call should be to check (or have your legal advisor review) the terms of the lease that relate to dilapidations and then consider instructing a surveyor to assess the state of the property in line with the lease.
The majority of dilapidation claims are normally settled through negotiation between the parties, and surveyors often act as negotiators in helping their clients reach a settlement. In these circumstances, the surveyor should apply their professional skills and experience to achieve the best possible outcome for their client, bearing in mind that their arguments may be tested if the negotiations fail and the dispute is referred to a dispute resolution procedure for settlement.
Should you wish to discuss any questions raised in this blog series in more detail or need assistance with a dilapidations claim, please get in touch: firstname.lastname@example.org or 0131 225 4235.
Chartered Building Surveyor