08 Dilapidations Flashcards
What are dilapidations?
Dilapidations are breaches of leases due to the condition of the property being leased, either during or at the end of the lease period
What guidance is available in terms of dilapidations?
RICS ‘Dilapidations’ (2012) guidance note
What is the purpose of a Schedule of Dilapidations?
- Basis of a dilapidations claim and is a list in a prescribed format detailing items of repair and decoration which a landlord considers is in need of remedying in order to comply with the terms of the lease
- Will often be used as a basis for negotiations between the landlord and tenant, with a view to reaching a settlement
What information would you include in a Schedule of Dilapidations?
- Item number
- Clause number breached
- Details of breach
- Remedial works required
- Cost of remedial works
What types of dilapidations schedules are available?
- Interim Schedule
- Terminal Schedule
- Final Schedule
When would you use an interim schedule?
Served during the term of the lease, giving tenants the opportunity to remedy any breaches before any outstanding works escalate
When would you use a terminal schedule?
Served within the last 3 years of the term of the lease, giving tenants early warning of any potential claim
When would you use a final schedule?
Served at the end of the lease and may contain the same breaches as the interim and terminal schedules, but the tenant will not be entitled to undertake remedial works themselves once their right of occupation ends
What is a Scott schedule?
- If a dispute is not resolved and proceedings are commenced, the claim may be based on the Schedule of Dilapidations prepared by the claimant’s surveyor
- A Scott Schedule is used to compare the claimant’s input with the defendant’s response
- Described by the Technology and Construction Court as a table in which the claimant’s case is set out item by item in the first few columns and the defendant’s response in the adjacent columns
What information would be contained within a Scott schedule?
- Item number
- Clause number breached
- Details of breach
- Remedial works required
- Landlord’s comments
- Landlord’s costs
- Tenant’s comments
- Tenant’s costs
How would you establish the costs in claims for dilapidations?
Cost information can be obtained from:
- Current BCIS data or other recognised price books (e.g. Spon’s), providing regional adjustments are applied
- Relevant and recent tender price information
- Consultation with a contractor
What documents would you examine prior to preparing a Schedule of Dilapidations?
- Lease
- Schedule of condition (including photos)
- Inventories
- Scaled plans
- Licenses or other consents for alterations
- Fit-out specifications
- Side letters or other written agreements
What is the significance of Section 18 of the Landlord and Tenant Act?
Section 18(1):
- Diminution valuation - for repairs, the landlord cannot claim for more than the difference in market value between the existing condition and the condition when repaired
- If the landlord is going to demolish the building or make structural alterations that would render any repairs valueless, then the tenant will not have to pay
What are the implications of Section 146 of the Law of Property Act 1925?
- Warns a tenant who is in breach of a covenant (not relating to paying rent) of the landlord’s intention to forfeit the lease
- The notice must specify the breach complained of and if the breach is remediable, require the tenant to remedy it
- Allows the landlord to recover from the tenant the costs and fees incurred following the serving of a Section 146 Notice
- NB: additionally, a clause is often written into leases allowing the landlord to recover from the tenant costs in the preparation and service of a schedule of dilapidations
What amendments to dilapidation procedures were brought about by the Woolf reforms?
The Woolf reform ‘Access to Justice Report’ (1996) focused on avoiding litigation and promoting settlement between parties at dispute, and essentially gave rise to the Civil Procedure Rules (CPR)
