Dilapidations: What Landlords and Tenants Need to Know

Commercial lease dilapidations can involve substantial sums - tens or even hundreds of thousands of pounds. The panel of chartered surveyors at Survey Merchant UK specialize in dilapidations advice for landlords and tenants, helping clients understand obligations, preparing schedules, negotiating settlements, and avoiding costly disputes. This guide explains everything you need to know about commercial property dilapidations.

What Are Dilapidations?

Dilapidations are breaches of lease covenants relating to repair, maintenance, decoration, and reinstatement of commercial premises. When tenants fail to comply with repairing obligations, landlords can claim dilapidations to recover costs of remedial works. CIOB, RPSA and/or RICS qualified building surveyors advise both parties on these complex matters.

The term "dilapidations" covers various lease breaches including physical disrepair, lack of decoration, alterations requiring reinstatement, and waste. Understanding your specific lease obligations is crucial - every commercial lease differs. Chartered surveyors review lease terms carefully when advising clients.

Types of Dilapidations

The panel of chartered building surveyors deal with different dilapidations types:

Terminal Dilapidations

Terminal schedules are served at or near lease end detailing all breaches. These are the most common and typically the most significant financially. The panel of qualified surveyors prepare comprehensive terminal schedules for landlords or challenge them for tenants. Claims can range from thousands to millions depending on property size and condition.

Interim Dilapidations

Interim schedules can be served during the lease term to prompt tenants to fulfill ongoing obligations. While less common, interim dilapidations help landlords protect property condition throughout tenancies. CIOB, RPSA and/or RICS surveyors advise when interim action is appropriate.

Variations of Repairing Obligations

Commercial leases contain different repairing standards. Chartered surveyors explain the implications:

• Full Repairing & Insuring (FRI): Tenant responsible for all repairs including structure
• Internal Repairing: Tenant maintains interior only
• Schedule of Condition: Limits repair obligations to condition at lease start

The Dilapidations Protocol

The Dilapidations Protocol (officially the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy) governs dilapidations procedures. CIOB, RPSA and/or RICS qualified surveyors ensure all work complies with the Protocol.

Key Protocol requirements:

• Schedules must be prepared in prescribed format
• Responses must follow set timescales
• Early engagement and negotiation encouraged
• Parties must act reasonably throughout
• Court costs penalties for non-compliance

For Landlords: Protecting Your Interests

The panel of chartered building surveyors advise landlords on maximizing legitimate recovery while complying with legal requirements:

Preparing Schedules of Dilapidations

Effective schedules from the panel of CIOB, RPSA and/or RICS qualified team include detailed descriptions of all breaches, references to specific lease clauses, scope of works required to remedy breaches, costs for each item, and supporting photographs. Well-prepared schedules strengthen negotiating positions and withstand tenant challenges.

Diminution Valuations

Section 18(1) Landlord and Tenant Act 1927 caps dilapidations at diminution in property value. CIOB, RPSA and/or RICS Registered Valuers provide expert diminution opinions determining maximum recoverable amounts. For properties being redeveloped, diminution may be nil, significantly limiting claims. Understanding diminution is crucial for realistic settlement expectations.

Timing Considerations

Chartered surveyors recommend serving terminal schedules within 56 days of lease end (though legally possible later). Early service allows more negotiation time and demonstrates landlords' serious intent. Delays suggest lower priority and weaken negotiating positions.

For Tenants: Defending Against Claims

Tenants receiving dilapidations schedules should immediately consult the panel of qualified surveyors. They help tenants challenge unreasonable claims and negotiate favorable settlements:

Reviewing Schedules Critically

The panel of chartered building surveyors scrutinize schedules identifying items beyond lease obligations, betterment (improvements not repairs), inflated costs, work not required, and supersession (works landlords plan making repairs pointless). Many initial schedules from landlords' surveyors include significant unreasonable elements. CIOB, RPSA and/or RICS expertise helps tenants avoid overpaying.

Preparing Responses

The Protocol requires tenant responses within 56 days. Our panel of qualified surveyors prepare comprehensive responses challenging incorrect items, disputing excessive costs, highlighting diminution implications, and proposing realistic settlement figures. Strong responses supported by the surveyor's chartered status encourage reasonable landlord negotiations.

Negotiation Strategies

Most dilapidations settle through negotiation. Building surveyors regularly achieve 30-50% reductions from initial claims through expert challenge and commercial negotiation. Understanding landlords' true intentions (refurbish, redevelop, re-let as-is) helps achieve best settlements.

Common Dilapidations Issues

The panel of chartered building surveyors frequently encounter these dilapidations disputes:

Decorations

Commercial leases typically require regular decoration. Disputes arise over decoration standards, what constitutes "good decorative order," and whether full redecoration is necessary versus touching-up. The panel of qualified surveyors assess decoration condition objectively, determining reasonable requirements.

Alterations and Reinstatement

Tenants making alterations during leases may need to reinstate premises to original condition at lease end. This can be extremely expensive. CIOB, RPSA and/or RICS surveyors advise on negotiating landlord licenses allowing alterations to remain, potentially avoiding substantial reinstatement costs.

Betterment

Landlords cannot profit from dilapidations by putting properties in better condition than required. Our panel of chartered surveyors identify betterment attempts - replacing serviceable items with new, upgrading specifications, or gold-plating repairs. Tenants shouldn't pay for improvements beyond genuine repairs.

Supersession

If landlords plan refurbishment or redevelopment making claimed repairs pointless, they cannot recover those costs. The building surveyors investigate landlords' intentions, using this to reduce claims. Empty properties likely being refurbished have limited genuine repair needs.

Typical Dilapidations Costs

Dilapidations claims vary enormously. Our panel of chartered surveyors' experience shows:

• Small offices (500-1,000 sq ft): £5,000-£15,000 typical claims
• Medium offices (2,000-5,000 sq ft): £20,000-£60,000
• Large offices/retail (10,000+ sq ft): £100,000-£500,000+
• Industrial units: Highly variable, £10,000-£200,000+

Costs depend on property size, lease obligations, occupation length, maintenance standards during tenancy, and property condition. Our panel of CIOB, RPSA and/or RICS qualified surveyors provide realistic assessments helping both parties negotiate sensibly.

The Dilapidations Process Timeline

Understanding typical timelines helps parties plan appropriately. Our panel of chartered building surveyors explain standard procedures:

1. Lease End: Tenancy expires
2. Within 56 days: Landlord serves Terminal Schedule
3. 56 days after schedule: Tenant serves Response
4. Following months: Negotiation between surveyors
5. 3-12 months post-lease: Settlement typically agreed
6. If no settlement: Court proceedings (rare, expensive)

Most dilapidations settle within 6-12 months of lease end. Court proceedings are uncommon given costs and risks. Our panel of qualified surveyors' expertise helps parties reach commercial settlements avoiding litigation.

Avoiding Dilapidations Disputes

Prevention strategies from our panel of CIOB, RPSA and/or RICS chartered surveyors:

For Landlords

• Regular property inspections during tenancies
• Interim schedules if serious breaches develop
• Clear lease drafting on repair standards
• Schedules of condition for older properties
• Good landlord-tenant relationships

For Tenants

• Understanding repair obligations before signing leases
• Regular maintenance throughout tenancies
• Photograph condition at lease start
• Negotiate alteration licenses carefully
• Consult our panel of chartered surveyors 12-18 months before lease end
• Consider surrender negotiations avoiding formal dilapidations

Professional Surveyor Fees

Dilapidations require specialist chartered building surveyors. Our panel of CIOB, RPSA and/or RICS qualified team's typical fees:

• Landlord Schedule preparation: £1,500-£5,000+ depending on complexity
• Tenant Response: £1,200-£3,000+
• Negotiation support: Ongoing fees as required
• Court expert witness: £3,000-£10,000+ if proceedings occur

Under most commercial leases, building owners (landlords) pay all reasonable surveyor costs including tenant surveyors' fees. This protects tenants financially while ensuring they get professional advice. Our panel of chartered surveyors provide transparent fee estimates before commencing work.

Get Expert Dilapidations Advice

Whether you're a landlord preparing claims or a tenant receiving schedules, our panel of CIOB, RPSA and/or RICS chartered surveyors at Survey Merchant UK provide specialist dilapidations services across London, Birmingham, Manchester, and Bristol. With extensive experience in commercial property and deep understanding of lease obligations, the qualified building surveyors protect your interests and achieve fair settlements.