What are dilapidations?
Leases of commercial property usually contain clauses requiring the business tenant to keep certain obligations both during and at the end of the lease, including to keep the property in ‘good repair’ at the end of the lease. Dilapidations refer to the business tenant’s breach of the repair clauses in the commercial lease. These beaches can arise during the lease term but are usually addressed and disputed once the lease ends.
Disputes often arise between landlords and tenants of a business tenancy when the parties cannot agree on what the tenant is responsible for repairing and stripping out of the premises, and who should pay the costs to do so. Problems usually occur if the lease is ambiguous, meaning that often commercial tenants are not fully aware of their duties under the tenancy; or the landlord considers that the tenant has not done enough to make good any disrepair, while the tenant believes he is being asked to do more than legally required.
Mercantile Barristers have expertise in providing advice and representation to landlords and tenants in dilapidations disputes. Our barristers are able to assist by providing pre-action advice or assisting you to bring a claim through the courts should settlement by mediation or other alternative dispute resolution be unsuccessful.
The Dilapidations Protocol
In January 2017, the Civil Procedure Rules published “The Pre-Action Protocol for Claims to Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy”, i.e. the Dilapidations Protocol, which sets out a framework for landlords and tenants to follow in dilapidations disputes. There are strict processes and time limits to follow which are designed to simplify the process of calculating any dilapidations claim and other related issues and encourage an early and amicable settlement of disputes without commencing litigation.
In the first instance, the landlord will usually appoint a surveyor to inspect the property at the end of the lease and serve a Schedule of Dilapidations on the tenant. The Schedule of Dilapidations is a list created by the landlord of all the alleged all the disrepair that needs to be made good by the tenant, as well as anything that needs to be made good so the tenant can re-let the property in a decent state.
If the parties follow the Dilapidations Protocol and there is still no agreement, it encourages alternative dispute resolution through mediation and negotiation to avoid litigation.
If the tenant disagrees with the Schedule of Dilapidations, by refusing to make the repairs or refusing to pay for the alleged disrepair and all attempts at alternative dispute resolution fail, then the landlord may consider that in the circumstances it is necessary for them to undertake the work themselves and take legal action against the tenant to claim damages.
Dilapidations Disputes
If the Court rules in favour of a landlord in a dilapidations dispute, the tenant may be liable to pay the reasonable cost of the repairs; the landlord’s reasonable professional fees; and the costs of the landlord engaging in litigation, within the court’s discretion. In some instances, the landlord may have suffered damage from a decrease to the value of the property as a result of the tenant’s actions, as well as loss of rent. Here, the parties will also do well to consider Section 18 (1) of the Landlord and Tenant Act 1927, where there is a statutory cap for the difference by which the value of the landlord’s interest has been reduced on account of the breaches of lease covenant, i.e. the ‘diminution in value’ of the landlord’s interest.
Dilapidations disputes usually require swift and proactive action so that both landlords and tenants can understand the legal position sooner rather than later and can assist the smooth transition from one property to another.
For landlords, you should seek advice swiftly so that you can concisely put your position to the tenant in advance and prepare them for what to expect. At times, the Schedule of Dilapidations may list repairs that the tenant simply cannot afford. Receiving dilapidations advice as soon as possible can put you in a better position to amicably resolve a dilapidations dispute and help in re-letting the property.
For tenants, it is better to negotiate the Schedule of Dilapidations rather than litigate. To do this, you will require a specialist commercial property dilapidations lawyer to advise on the legal and valuation issues that arise during dilapidation claims, and save you time and money when negotiating the landlord’s claims. It is recommended you speak to a solicitor within the last 6 to 12 months of the lease to start the negotiation process. Further, conducting repair works before the lease ends will largely achieve a better settlement than leaving the property in a state of disrepair.
Mercantile Barristers have expertise in providing advice and representation in dilapidations disputes for landlords and tenants, whether they are businesses or individuals. We have experience in advising clients on navigating the Dilapidations Protocol correctly in order to reach an amicable agreement between the parties, including on interim and final dilapidations schedules. If litigation is required, our property litigation barristers and can provide practical, specialist advice and representation to initiate or defend aa claim through the courts should settlement by mediation or other alternative dispute resolution be unsuccessful. If you require advice contact our Property Litigation barristers today by filling in our Enquiry Form; emailing us at enquiries@mercantilebarristers.com; or by telephone on 0203 034 0077 and we would be happy to assist.
How Our Process Works
You can call, email, or fill out an enquiry form to tell us about your case. One of our specialist clerks will speak with you to make the arrangements to advance your case.
Our specialist clerk will match you with the barrister with the expertise to deal with all aspects of your case. They will also obtain and organise the papers the barrister will have to consider in your case.
Our clerk will agree the fee for your consultation with the barrister beforehand. The clerk will then arrange a convenient time for you to have the consultation by video call, telephone or in person.
In the consultation the barrister will assess your legal position, devise a legal strategy, and give you appropriate advice on the necessary next steps to achieve your objective.
Fill in the form below and one of our specialist clerks will get in touch.
