RICS Dilapidations Guidance Note

Question 1

What is a Diminution Valuation?

Answer 1

A Valuation prepared in order to calculate the diminution in value of a landlord’s property incurred as a result of alleged breaches. It is usually prepared by a a specialist valuation surveyor.

Question 2

What is the Quantified Demand?

Answer 2

The document prepared for the purpose of complying with part 4 of the Protocol, typically incorporating a Terminal Schedule of Dilapidations.

Question 3

What is the ‘Response’?

Answer 3

The tenant’s response document prepared under Part 5 of the Protocol, typically incorporating a Scott Schedule.

Question 4

What is a Scott Schedule?

Answer 4

A longer-form version of the Schedule of Dilapidations allowing the tenant to respond.

Question 5

What must a Schedule of Dilapidations do/contain?

Answer 5

Details of documents reviewed and relied upon
An itemised numbered list of breaches
Relevant lease/tenancy obligations.
Alleged breaches of those obligations.
Remedial works that are proposed in order to rectify the breach.
The estimated or actual cost incurred in remediating those breaches.

Question 6

What is an Interim Schedule of Dilapidations?

Answer 6

A schedule prepared inc ontemplation of any alleged breaches during the contractual term of the lease, not relating to yield-up obligations.

Question 7

What is a Terminal Schedule of Dilapidations?

Answer 7

A Schedule of Dilapidations prepared at or shortly after the end of the lease term, or in anticipation of same.

Question 8

What documentation should be obtained when preparing a dilapidations claim?

Answer 8

Lease/Sub-Lease
Floorplans
Licence for Alterations
Reinstatement Notices if needed
Schedules of Condition
Inventories
Statement of the Landlord’s Intentions

Question 9

What should be considered about the surrounding area when considering expected standard of repair/reinstatement?

Answer 9

The history of the area, the nature of the location and the general standard of repair of properties may have some influence as to what is reasonable. It will also influence any diminution valuation, and the surveyor should be cognisant of this.

Question 10

What remedies are available to a Landlord for an interim claim?

Answer 10

Damages
Forfeiture of Lease
Specific Performance
Entry to Carry out the Works

Question 11

What is a ‘Jervis v Harris’ clause?

Answer 11

A clause in a lease that allows for specific conditions under which the landlord has a right to enter to carry out works.

Question 12

What remedies are available to a Landlord for a terminal claim?

Answer 12

The only remedy available after lease end is damages.

Question 13

What is the limit on a Landlord’s claim?

Answer 13

A landlord may claim the lower of either the cost to remedy the breaches or the diminution in value.

Question 14

What is Section 18(1) ‘Limb 1’?

Answer 14

Damages are limited by the diminituiton in value owing to the breach.

Question 15

What is Section 18(2) ‘Limb 2’?

Answer 15

Damages cannot be claimed for works that would be superseded by further works the landlord intends to undertake, either as a result of a further breach or the landlord’s intentions.

Question 16

To what type of obligation does Section 18 relate to?

Answer 16

Section 18 only refers to damages arising from ‘repair’ obligations.

Question 17

What costs other than the remedies may be considered in a dilapidations claim?

Answer 17

Professional fees for preparation
Professional fees for service
Professional Fees for design/admin work
Costs associated with CDM compliance.
Costs associated with statutory requirements.
An allowance for irrecoverable VAT.

Question 18

What is a surveyor’s endorsement?

Answer 18

The surveyor must provide an endorsement of their client’s Schedule of Dilapidations, confirming that all the works set out are reasonably required, full acount has been taken of the landlord’s intentions and that the costs included are reasonable.

Question 19

What must a surveyor clarify before the endorsement?

Answer 19

The landlord’s intentions for the property, save for where the schedule is served prior to lease end and the landlord’s intentions are unknown. At which point the surveyor may remove the landlord’s intentions from their endorsement, and subsequently issue a full endorsement at lease expiry.

Question 20

What must a tenant do to bring a dilapidations claim against the landlord?

Answer 20

The tenant must notify the landlord of the breach in writing before bringing a claim. The remedies available are damages, set-off against rental payments (where not explicitly excluded in the lease), self-help and specific performance.

Question 21

What should a surveyor check where a break clause has been triggered?

Answer 21

That the terms of the break clause have been met, and any notices have been sufficiently served in a timely manner as dictated by the terms of the break clause.

Question 22

What should a Settlement Agreement be?

Answer 22

A settlement agreement should;

Be in writing, indentifying;
The Parties
The Lease
The Schedule of Dilapidations
In full and final settlement
Payment terms
Agreed works
Agreement date
Signed agreement of both parties

Question 23

What is the Quantified Demand?

Answer 23

The QD is the assessment of loss. The schedule is a schedule of breaches, but not all of these will necessarily result in a loss.

The QD considers the likely loss, including works, loss of rent, professional fees, and may be supported by a valuation from a valuer.

Served after lease end.