Good FRI lease tenant protection starts with what you negotiate before signing, but most dilapidations bills are decided by what happens during the lease: the records you keep, how you maintain the building, how you manage alterations and break dates, and how you respond when the landlord serves a claim. This guide sets out a practical plan for each stage so your business keeps control of its liability.
If you have not yet signed, start with our full repairing and insuring lease checklist, then come back here.
Why tenants on FRI leases need a plan
A lease is a contract. Under a full repairing and insuring lease the tenant typically takes responsibility for repairing the premises, often including the roof, rainwater goods, drainage and services, and for the cost of insurance. At the end of the term the landlord can claim for breaches of those covenants. Without evidence and planning, tenants often find the first realistic estimate of their liability arrives with the landlord’s schedule of dilapidations.
Stage 1: Lock in your evidence at the start
Keep the schedule of condition safe and usable
If you commissioned a schedule of condition survey before occupation, it is one of the most important documents your business holds. Store signed digital and paper copies with the lease, and make sure the people who will deal with the exit in 5 or 10 years know where it is. If the property is sold during the term, the schedule becomes even more important because the new landlord will have no first-hand knowledge of the original condition.
Build a lease file
Keep together:
- The lease, any deeds of variation and the agreed schedule of condition.
- Licences for alterations, with the plans and specifications that were approved.
- Correspondence with the landlord about repairs, consents and reinstatement.
- Invoices and certificates for repairs, maintenance and servicing.
This file is your defence if a claim arrives.
Stage 2: Manage repair liability during the lease
Plan maintenance before things fail
Small repairs done on time are far cheaper than major failures dealt with at exit. A planned preventative maintenance survey sets out what needs attention and when, so you can budget each year and show the building has been kept in repair. Priority items on most FRI leases are roofs, gutters and downpipes, drainage, external decorations and building services.
Record the work you do
Photographs before and after repairs, contractor reports and service records help prove compliance. They also help your surveyor argue that alleged disrepair is fair wear and tear, where the lease allows for it, or pre-dates your occupation.
Handle alterations properly
Always obtain written consent before alterations and check what the licence says about removal at the end of the term. Unauthorised alterations can create both a repair and a reinstatement liability, and reinstatement is often one of the largest items in an end-of-lease claim.
Respond to interim schedules
Landlords can serve a schedule of dilapidations during the term, not only at the end. Take it seriously, get advice on which items are genuine breaches, and agree a programme. Ignoring an interim schedule can escalate into a larger dispute later.
Put a number on it for your accounts
Your auditors may expect a provision for future dilapidations. An independent dilapidations liability assessment gives your finance team a defensible figure and avoids a sudden hit to profit at exit. See our guide to dilapidations provision.
Stage 3: Protect your break option
If your lease has a break clause, the conditions attached to it are critical. Some breaks require the tenant to have paid all rent, to give vacant possession, or to have complied with its repairing obligations. A failure, even a small one, can mean the break is ineffective and you remain bound by the lease.
Practical steps:
- Diarise the break date and the notice deadline well in advance.
- Have your solicitor check the exact break conditions and notice requirements.
- Instruct a surveyor at least 12 to 18 months before the break date to assess what work, if any, is needed to satisfy the conditions.
- Keep evidence that each condition was met.
Stage 4: Prepare for the end of the lease
Get an early liability assessment
Around a year or two before expiry, commission a dilapidations liability assessment, in which a dilapidations surveyor inspects the premises against the lease and your schedule of condition and estimates your likely liability. You can then decide whether to carry out the work yourself before you leave, which is often cheaper, or negotiate a financial settlement instead.
Understand how claims are handled
In England and Wales, terminal dilapidations claims for commercial property are governed by the Dilapidations Protocol. It expects the landlord to serve a schedule of dilapidations within a reasonable time, generally within 56 days of the tenancy ending, identifying each alleged breach, the clause concerned and the works said to be required. It also expects a quantified demand limited to the landlord’s likely loss, which is not necessarily the cost of the works. The tenant is then usually expected to respond within 56 days of the quantified demand, so having your surveyor lined up in advance matters. Our guide to the schedule of dilapidations explains the Quantified Demand and the response process step by step.
Know the statutory cap on damages
Under section 18(1) of the Landlord and Tenant Act 1927, damages for breach of a repairing covenant cannot exceed the amount by which the value of the landlord’s interest has been reduced by the disrepair. No damages are recoverable for failing to leave premises in repair if the building is to be demolished, or structurally altered in a way that would make the repairs valueless, at or shortly after the end of the lease. If the landlord plans to refurbish or redevelop, this can reduce a claim significantly, and specialist valuation and legal advice are important.
Challenge the schedule item by item
A tenant’s surveyor will typically:
- Compare each item with the lease wording and the schedule of condition.
- Remove items that pre-date the lease, are fair wear and tear (where excluded), or are not breaches at all.
- Challenge the scope and cost of the remedial works.
- Consider whether the landlord’s real loss is lower than the cost of works.
What this looks like in practice
One of our clients was served with a schedule of dilapidations on their Liverpool office. In their words:
“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.” Andrew Prentice, Liverpool
Every case turns on its own lease and facts, but it shows why tenants should never accept a schedule at face value. See our dilapidations case study for more detail on our approach.
Frequently asked questions
Can a landlord make me improve the building?
Generally, a repairing covenant requires repair, not improvement, but the standard depends on the lease wording and the building. A schedule of condition written into the lease is the clearest way to limit your obligation.
Should I do the dilapidations works myself before I leave?
Often it is cheaper to complete agreed works before the lease ends, but it depends on the building, the landlord’s plans and the time available. Get a dilapidations liability assessment first.
What if the landlord is going to refurbish anyway?
Section 18(1) of the Landlord and Tenant Act 1927 may limit or remove the landlord’s claim for some items. You will need evidence of the landlord’s intentions and professional advice.
Is this legal advice?
No. This guide is general information. Take advice from a solicitor and a RICS chartered surveyor on your own lease.
Get tenant-side dilapidations advice
Lansdown Associates is a RICS regulated firm of chartered surveyors acting for tenants and landlords on schedules of condition, planned maintenance and dilapidations. Call 0151 374 0905 or email office@lansdownassociates.co.uk to discuss your lease.
