Dilapidations: concerned about the condition of your properties
With all businesses looking to cut costs at the moment, some tenants have been failing to keep their properties in a good state of repair. As the landlord, you will naturally wish to recover your premises in the same (if not better) condition as they were let.
Dilapidations are breaches of the tenant’s covenant to repair the premises during the lease term and there are a number of steps that a landlord can take to ensure that they are not left out of pocket.
What can you do if you are concerned about the condition of tenanted premises?
Where there is at least three years of the lease remaining, you can serve an ‘interim schedule of dilapidations’ on a tenant at any time during the term. This will specify the disrepair and the works that you require the tenant to carry out.
Where three years or less of the lease remain and for up to six years after the lease has expired, you can serve a ‘terminal schedule of dilapidations’. This will specify the disrepair and the value of your claim for damages if the works are not completed by the tenant. Since the tenant usually wishes to remain in the premises until the lease expires, the work will not get done and so, essentially, this is a claim for damages. The tenant will not be permitted to carry out any repair works after the lease has ended.
What damages can be claimed?
You have a right to claim:
- the cost of repairing the premises
- re-decorating costs
- the costs of reinstating works carried out by the tenant during the term
- the costs of putting the premises in compliance with current statutory and regulatory requirements, where appropriate
- any costs incurred in the preparation and service of a schedule of dilapidations
- loss of rent and any other sums payable under the lease for the period it takes to undertake the works set out in the schedule.
Can a tenant reduce their liability for dilapidations?
Yes, at the outset of the transaction when you are negotiating a new lease. Usually, the lease is on “full repairing” terms, which means the tenant is responsible for keeping the premises in good repair even if they are not in good repair at the outset. The tenant can seek to agree with you that their obligation to repair is limited by reference to a ‘schedule of condition’. This schedule will record the general condition of the premises at the start of the lease using photographs and a narrative or record only specific items of disrepair. This means that the tenant will not be obliged to return the premises in any better state of repair or condition at the end of the term.
The tenant may also be able to rely on statutory relief from dilapidations under the Leasehold Property Repairs Act 1938 or under section 18 (1) of the Landlord and Tenant Act 1927. If a tenant seeks to rely on these provisions, you should contact us immediately for advice.
Can a tenant’s liability for dilapidations be ‘rolled over’?
A tenant’s liability for dilapidations can be ‘rolled over’ on the assignment of a lease and the new tenant (the assignee) will inherit any disrepair. In addition to any disrepairs, the new tenant will also inherit the cost of reinstating any alterations that have been carried out during the term up to the date of assignment. It is up to the new tenant to negotiate a payment from the existing tenant to cover the cost of any potential dilapidations claim at the end of the term. Either way, a landlord should not be affected by their arrangement. However, in some leases the landlord has the opportunity to withhold consent to an assignment of the lease if there are serious outstanding breaches of the lease.
If you are concerned that a tenant is not keeping one of your properties in a good state of repair, please contact us and we will advise on the best course of action.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.