Dilapidations are often seen by tenants as an unfair expense, enforced on them at an already turbulent time. If assessed property, dilapidations shouldn’t be unfair; in this week’s blog we’ll discuss how costs are put together, who needs to pay them and what to do if you disagree.
What are dilapidations?
Dilapidations are claims for damages, made (in most cases) by a landlord against a tenant. These damages relate to the condition of the landlord’s property at the end, or sometimes middle of, a lease term.
This is important to remember; as a claim for damages, a landlord can only make a claim for dilapidations if they’ve suffered a loss. These losses could be the cost of repairing damage to a property, having to redecorate, or remove alterations.
Who has to pay for dilapidations?
Although it’s usually the tenant’s responsibility to pay for dilapidations costs, it’s always essential to check the lease to confirm this. A typical commercial lease will contain information related to:
Repair: A repair clause will provide the level of repair required during the lease, and at its end. Sometimes a ‘schedule of condition’ will be included, which details the condition of the property at the start of a lease and limits any responsibility to improve the property any further than the condition it shows.
Alterations: alterations clauses explain what, if any, alterations are allowed during the term. These will often require the landlord’s permission, along with any requirements to remove them at the end of the lease. If alterations have been undertaken without permission, the landlord will have to do the work themselves and may wish to make a dilapidations claim to pay for it.
Redecoration: Many leases include a requirement for the tenant to redecorate regularly during the term, and to redecorate when giving back the property. If this hasn’t been followed, a claim may be made against the tenant to pay for the work.
The area covered by the lease: also known as the ‘demise’, this tells you exactly what the tenant bears responsibility for. This will detail whether the whole building is included, along with any grounds or building services. If the lease covers part of a larger building, it should state whether the tenant is responsible for any structural elements or shared spaces.
The tenant may be responsible for other issues including maintenance of electrical services, asbestos management, or payment of the landlord’s fees if they make a dilapidations claim. If you’d like assistance reviewing a lease, feel free to contact us for advice.
How are costs calculated?
If a landlord wants to make a claim, a dilapidations surveyor will need to produce a schedule of dilapidations. This includes a full list of claims that the landlord will need to pay for, which they consider to be the tenant’s responsibility. Each line should then be separately priced, with an assessment by the surveyor of the cost of carrying out the work by a professional contractor. The list will also need to include costs such as the contractor’s additional costs for overheads, scaffolding costs, professional fees and VAT.
What if the tenant disagrees?
It’s common that the tenant will dispute the costs of dilapidations works, or dispute whether they should be held responsible. It’s always advised that both parties appoint a dilapidations surveyor to negotiate for them, who fully understands the process and can help them resolve any issues and reach a settlement. If the lease hasn’t ended, the tenant can also undertake any required work to reduce any costs they’ll need to pay. If a tenant decides to do the work themselves, we strongly recommend that the landlord is allowed to check the works to make they agree with the extent of the work and the materials used.
Dilapidations shouldn’t be a penalty; the costs should be a genuine reflection of any loss the landlord will suffer due to the lease not being followed properly. A reputable dilapidations surveyor will accurately check the lease to check for breaches, and provide accurate costs for any works that are needed. This may involve getting quotes from several contractors.
If you require assistance with a dilapidations matter as either a landlord or a tenant, please don’t hesitate to contact us for further advice.