Tips on how to maximise your dilapidations claim

Helen Bell, Partner at Mayo Wynne Baxter, explains how a little knowledge can help landlords recover more.

Yes, this is a dry subject and perhaps, to some, not that interesting. However, by taking note, it could make the difference between recovering thousands of pounds and recovering little or nothing when the time comes.

Most properly prepared leases will contain the usual covenants requiring the tenant to leave the property in the same condition as it was at the time the lease was originally granted. A seasoned landlord will know that even where the lease clearly sets out the tenant’s obligations, there are steps that they can take prior to the lease ending to minimise their losses and the potential letting void should the property be left in a noncompliant lease condition.

Plan in advance

At the end of the lease the landlord will generally be considering if the tenant is liable for dilapidations. The relevant covenants of the lease to consider are usually:

• Repairing covenants

• Decorating covenants

• Covenants to comply with statute

• Covenant to yield up the property in a specified condition

• Reinstatement covenant

Properly drawn, the lease will include a covenant permitting the landlord to enter the building for the purpose of inspecting the condition.  It is advisable to inspect the property, and the detailed terms of the lease, about 6 months prior to term end to record the condition and inform the landlord’s strategy for dealing with any dilapidations.

Some leases, or licences to alter, may include a clause that certain works must be reinstated prior to lease end but only on being given the requisite landlord’s notice. Accordingly, an early inspection gives the landlord time to serve the appropriate notice avoiding a complete defence by the tenant for any failure to reinstate the property.

Prepare and serve an Interim Schedule of Dilapidations

Different rules apply for the recovery of the costs of repairs by the landlord if they are done during the lease than if they are done after lease end. There are various advantages to serving an interim schedule of dilapidations before the lease comes to an end: 

• It gives the tenant time to undertake all the repairs therefore reduces the period between the tenant leaving and the landlord being able to relet the property.

• If the tenant is obstructive, it gives the landlord time to invoke a clause permitting them to undertake the work themselves and recover the costs of doing so as a debt. 

• It can act as notice to reinstate giving the tenant enough time to undertake reinstatement works which can sometimes be substantial.

• It can prompt a dialogue between the landlord and tenant where there are differences in opinion of what repair works may be required increasing the possibility of an early settlement thus saving costs.

After the lease has expired

When the lease has ended the landlord must comply with the Dilapidations Protocol otherwise known as the Pre-Action Protocol for Claims for Damages in relation to the physical state of commercial property at termination of a tenancy. 

The Protocol prescribes a timetable for dealing with the dilapidations claim. A failure to follow the Protocol may lead to a delay in recovery of damages and/or a court sanction which is usually reflected by an order disallowing certain costs of bringing the claim.

The Protocol requires the landlord to serve a schedule of dilapidations and a quantified claim within 56 days of the lease expiry. It is essential that the landlord is fully prepared and armed with advice from a qualified building surveyor as well as being conversant with the Protocol or has access to an experienced and specialist legal advisor in property disputes. It is at this time that matters of strategy come into play; how stringently should the landlord comply with the Protocol? What are the costs and what are the risks? Every case is different. If the dilapidations are £200,000 then the advice may differ than if the dilapidations are £20,000.

A well-prepared Protocol compliant Claim letter may reap dividends by placing the landlord in a strong position to negotiate a good settlement. Conversely, if the claim letter is non-complaint this can lead to delays and additional costs to deal with technical defences and to put your house in order before being in a position to make a claim.

Once the lease has expired the landlord’s ability to recover the costs of putting the property back into repair is curtailed by section 18 of The Landlord and Tenant Act 1927 which imposes a cap on the damages that can be claimed arising from a breach of the repairing covenants. This is why it is always better for the landlord to start considering the dilapidations issues well in advance of the lease coming to an end.

We at Mayo Wynne Baxter LLP have specialists in property litigation including Helen Bell who is ranked in Legal500 2023 and Chambers 2023. We are happy to help navigate the Protocol to maximise the prospect of an early and successful resolution to your dilapidations claim. 

hbell@mayowynnebaxter.co.uk

www.mayowynnebaxter.co.uk