CommercialDilapidations surveyor for commercial landlords and tenants

Lansdown Associates provides an independent dilapidations surveyor service for commercial landlords and tenants. Our RICS Chartered Surveyors review the lease, inspect the property, prepare or respond to schedules of dilapidations and negotiate settlements, so you understand your position well before the lease ends.

Commercial dilapidations can be a significant financial consideration for both landlords and tenants as a lease approaches its end. Understanding your obligations early can reduce financial exposure, avoid unnecessary disputes and make sure the property is dealt with appropriately at lease expiry. Whether you are a landlord protecting your property investment or a tenant looking to understand your dilapidations liability, this four-part guide explains:

What commercial dilapidations are
How the Dilapidations Protocol works
How landlords and tenants can prepare
How an RICS Chartered Surveyor can help at the end of a commercial lease

Part 1: What are commercial dilapidations?

Dilapidations are breaches of a tenant’s obligations under a commercial lease relating to the condition, repair, reinstatement or decoration of a commercial property.

The tenant’s obligations are normally set out in the lease and can vary significantly depending on the terms agreed between landlord and tenant. The lease must therefore be carefully reviewed before deciding whether a tenant has a dilapidations liability at all.

Most commercial dilapidations claims cover three areas:

Repair – bringing the property back into the condition required by the lease.
Reinstatement – removing alterations, fit-outs or tenant improvements where the lease requires it.
Redecoration – carrying out internal or external decoration in line with the tenant’s lease obligations.

For tenants, failing to comply with these obligations can result in a significant terminal dilapidations claim from the landlord. For landlords, a comprehensive schedule of dilapidations identifies breaches of the lease and establishes the works and costs needed to put the property into the condition the lease requires. Where the landlord has its own repairing obligations under the lease, a tenant can also serve a schedule on the landlord.

A dilapidations claim covers breaches of the lease, not everything that is wrong with a building. It must be considered in the context of the lease, the tenant’s contractual obligations, the condition of the property and the landlord’s intentions for the building. A defect may exist without giving rise to a recoverable dilapidations claim.

What is a terminal dilapidations claim?

A terminal dilapidations claim is generally made by a landlord at or towards the end of a commercial lease, where the tenant has failed to comply with its obligations concerning the condition of the property. The landlord may seek damages for the cost of remedying the breaches, but the amount that can ultimately be recovered is subject to legal and contractual limits. That is why professional dilapidations advice before lease expiry benefits both parties.

What about interim schedules?

An interim schedule is served during the lease, for breaches the landlord wants put right while the tenant is still in occupation. Different rules apply. For leases originally granted for seven years or more with at least three years left to run, the Leasehold Property (Repairs) Act 1938 allows the tenant to serve a counter-notice, after which the landlord needs the court’s permission to pursue damages or forfeiture for disrepair. We advise on which route applies before any work is priced.

Part 2: Introduction to the Dilapidations Protocol

The Dilapidations Protocol provides a framework for dealing with claims about the physical condition of commercial property at the end of a tenancy. Its full title is the Pre-Action Protocol for Claims for Damages in relation to the Physical State of Commercial Property at Termination of a Tenancy. Its purpose is to encourage landlords and tenants to exchange relevant information, understand each other’s position and try to resolve disputes without unnecessary court proceedings.

The schedule of dilapidations and the tenant’s response

The main document is the schedule of dilapidations. The landlord’s surveyor normally prepares it. For each alleged breach of the tenant’s lease obligations, it sets out the lease clause, the breach, the work needed to remedy it and the cost. The tenant and its surveyor then review the schedule and prepare a response. The Protocol expects that:

The landlord sends the schedule, endorsed by the landlord or its surveyor, generally within 56 days after the tenancy ends, and within the same timescale sends a Quantified Demand setting out the damages claimed and confirming whether VAT applies.
The tenant responds within a reasonable time, usually within 56 days of the Quantified Demand, commenting on each item in the landlord’s schedule.
If the tenant relies on a defence based on diminution in value, it states its case and provides a diminution valuation.
The parties meet, generally within 28 days after the tenant’s response, and consider alternative dispute resolution.

The Protocol encourages the parties to engage constructively and share information early, to narrow the areas of disagreement and, where possible, reach a negotiated settlement. The court can take compliance into account when deciding who pays costs. Our guide to the schedule of dilapidations explains interim and terminal schedules, the Quantified Demand and how tenants should respond in more detail.

The landlord’s future intentions and the section 18(1) cap

The parties should consider more than the cost of the works. The landlord’s future intentions for the property can be highly relevant. If a landlord intends to carry out a substantial refurbishment or redevelopment after the lease ends, its actual loss may differ from the cost of every item in the schedule.

This is reflected in section 18(1) of the Landlord and Tenant Act 1927:

The diminution cap. Damages for breach of a repairing covenant cannot exceed the amount by which the value of the landlord’s reversion is reduced by the disrepair.
The supersession limb. No damages are recoverable for failing to leave the premises in repair if the property is to be pulled down, or structurally altered in a way that would make those repairs valueless, shortly after the lease ends.

This is one reason commercial dilapidations disputes can become complex, and why early professional and legal advice is recommended.

Scott Schedules

As negotiations progress, the parties’ positions are usually brought together in a Scott Schedule: a single table listing each item of claim alongside the landlord’s case, the tenant’s response, each side’s costings and a column for comments or agreed figures. It shows quickly which items are agreed, which are disputed on liability and which only on cost, so negotiation focuses on the items that move the figure. If a claim reaches court, it is often the working document for the parties and their experts.

Part 3: How to prepare for commercial dilapidations

One of the most effective ways to manage dilapidations liability is to start preparing well before the end of the lease.

Advice for commercial tenants

Tenants should ideally review their lease obligations several years before expiry. Leaving it until the final months of the tenancy limits the options. A tenant dilapidations survey can identify potential breaches and give an early indication of the likely financial exposure. Your surveyor can review:

Repair and maintenance obligations
Reinstatement requirements
Internal and external decoration
Alterations and tenant fit-out
Mechanical and electrical installations
External areas and landscaping
Statutory compliance requirements, where relevant
The condition of the building
Any schedule of condition attached to the lease

Early identification gives tenants more opportunity to carry out appropriate works before lease expiry, where commercially and contractually sensible. For example, if the lease requires redecoration in the last three to six months of the term, you can programme it around your business activity.

Keep good records throughout the lease. Schedules of condition, photographs, maintenance records, repair invoices, warranties and records of alterations can all be used as evidence when a claim is assessed. If you need a figure for your accounts, see our dilapidations liability assessment service.

Advice for commercial landlords

Landlords should also consider dilapidations well before lease expiry. A pre-expiry inspection can identify potential breaches and help you decide your preferred strategy for the property. For example, will the property be:

Re-let in its existing form?
Refurbished?
Substantially altered?
Redeveloped?
Sold?
Held as an investment?

Understanding the property’s future is important when considering the potential loss. Landlords should also review any schedule of condition prepared at the start of the lease; where properly incorporated into the lease, it may have a significant bearing on the extent of the tenant’s repairing obligations.

When should you obtain a dilapidations survey?

There is no need to wait until the lease expires. Ideally, tenants should consider a dilapidations assessment 12 to 24 months before lease expiry, or earlier where the lease contains extensive repairing, reinstatement or alteration obligations. Early advice gives landlords and tenants more time to understand their position, obtain costs, plan works and negotiate where appropriate.

Part 4: How an RICS Chartered Surveyor can help with dilapidations

An RICS Chartered Surveyor can provide specialist commercial property and building surveying advice to landlords and tenants throughout the dilapidations process.

Dilapidations advice for landlords

We inspect the property, review the relevant lease obligations and prepare a professional, Protocol-compliant schedule of dilapidations. We identify relevant breaches, advise on appropriate remedial works and prepare or assess the associated costs. We also consider your future plans for the property and work alongside your legal advisers to support you through negotiations with the tenant.

Dilapidations advice for tenants

We independently review the landlord’s schedule of dilapidations and assess each item against your contractual obligations. This may identify items that are:

Not required by the lease
Excessive or disproportionate
Already addressed by previous works
Subject to a schedule of condition
Unsupported by appropriate evidence
Inappropriate given the landlord’s intentions for the property

We also review the landlord’s proposed costs and negotiate with the landlord’s surveyor to seek an appropriate reduction in your liability.

Why use an RICS Chartered Surveyor?

Dilapidations require an understanding of both commercial property and building condition. An RICS Chartered Surveyor combines knowledge of building pathology, construction, and repair and refurbishment costs with an understanding of commercial lease obligations and how dilapidations work in practice. At Lansdown Associates:

We are RICS regulated, and our dilapidations work is carried out by RICS Chartered (Building) Surveyors.
We act for both landlords and tenants, so our advice reflects how claims are really argued.
We have expert witness experience. Our director John Jackson MRICS MEWI is a member of the Expert Witness Institute, which matters if a dispute does not settle.
We work alongside your solicitor. We advise on surveying and cost matters; legal questions are for your legal adviser.

Results for our clients

The tenant of a large industrial premises in Stoke-on-Trent received a terminal schedule claiming £1,600,000. We reviewed the lease documents in detail, challenged the claim item by item and settled it for £320,000. Read the full dilapidations case study.

Lansdown Associates represented us on a Dilapidations and Lease Surrender matter. John was very thorough and provided astute advice throughout. The settlement we received was over and above what we had expected. We would definitely recommend

Joe, Dublin

Lansdown Associates helped us with a Dilapidations settlement on our Office in Liverpool. Our Landlord had provided us with a Schedule of Dilapidations asking for £85,000.00. We couldn’t afford this, so we asked for help. We managed to settle the Dilapidations for £15,000.00 and can’t thank Lansdown Associates enough for their help. We will always use them in future

Andrew Prentice, Liverpool

Areas we cover

We have offices in Liverpool (Rodney Chambers, 40 Rodney Street, L1 9AA, and Estuary Business Park, L24 8RL), Manchester (Peter House, Oxford Street, M1 5AN) and London (85 Great Portland Street, W1W 7LT), and act on dilapidations matters nationally, including London, Birmingham, Liverpool, Manchester, Leeds and Northern Ireland.

Related services and guides

Dilapidations liability assessment – a costed lease-end figure for budgeting and your accounts.
Schedule of condition survey – record the condition before you sign and limit what you can be asked to put right later.
Technical due diligence survey – understand a building before you acquire or lease it.
Planned preventative maintenance survey – keep on top of repairing obligations during the lease.
Guide: full repairing and insuring lease – what to check before you sign.
Guide: FRI lease tenant protection – protecting your business during the lease and at the end.

Dilapidations FAQs

When should a tenant instruct a dilapidations surveyor?

Ideally 12 to 24 months before the lease ends, or earlier if the lease has extensive repairing, reinstatement or alteration obligations, and always before serving a break notice. If you have already received a schedule, contact us straight away, as the Protocol timescales will be running.

Can a landlord claim the full cost of the works?

Not necessarily. Under section 18(1) of the Landlord and Tenant Act 1927, damages for disrepair are capped at the reduction in the value of the landlord’s interest, and nothing is recoverable for repairs that would be made valueless by demolition or structural alteration. Redecoration and reinstatement items also depend on the precise wording of the lease.

Is every defect in the building a dilapidations item?

No. A defect may exist without giving rise to a recoverable claim. Each item must be linked to a specific lease obligation, supported by evidence and considered against the landlord’s intentions for the property.

Do you act for landlords as well as tenants?

Yes. We prepare schedules and pursue claims for landlords, and assess and defend claims for tenants. We check for conflicts of interest before accepting any instruction.

Does a schedule of condition reduce dilapidations liability?

It can. Where a schedule of condition is properly incorporated into the lease, the tenant is usually only required to return the property in the condition it records. We review it as part of every dilapidations instruction.

Planning for lease expiry?

If your commercial lease is approaching its end, early dilapidations advice can make a significant difference. We can help you understand your obligations, assess the condition of the property, identify potential liabilities and develop a practical strategy. Call 0151 374 0905 or email office@lansdownassociates.co.uk (Monday to Friday, 09:00 to 17:00) for a free quote.