1) The term “dilapidations” refers to breaches of lease covenants that relate to the condition of the property, and the process of remedying those breaches.
2) Some Definitions
A “Schedule of Dilapidations” is a document prepared by the Landlord (or their surveyor) which lists the allegations, suggests remedial works and sometimes estimates the costs of those
A “Quantified Demand” is a document prepared by, or on behalf of, the Landlord which sets out further details of the allegations. It is only issued after the end of the lease. It includes details of what the Landlord considers to be its likely loss as a consequence of the tenant’s alleged breaches. The likely loss does not always equate to the cost of the works set out in the Schedule of Dilapidations.
A “Response” is the reply from the Tenant (or their surveyor) to the Quantified Demand and/or Schedule of Dilapidations. This normally takes the form of a covering letter / email and a Scott Schedule.
A “Scott Schedule” is an extended version of the Schedule of Dilapidations which allows space for the Tenant’s surveyor to comment on the content of the Schedule of Dilapidations
3) Prior to signing the lease
Familiarise yourself with the lease terms and their dilapidations implications prior to signing the contract. A chartered building surveyor can advise you of the implications of the clauses you are signing up to.
4) During the lease term
Consider their potential future dilapidations liability in good time, and budget for that future obligation.
If you undertake alteration works to the premises then it is likely that your landlord may require you to reinstate those alterations shortly before the end of the lease. A Licence for Alterations (or Licence to Alter) is often agreed which sets out the obligations.
5) Near the end of the lease term
Dilapidations disputes can ultimately end in a court.
You may be advised to make offers to settle at various stages, and should consider such advice carefully, as it may be referred to later in court.
You should be aware of the extent of dilapidations work you have committed to complete.
It is normal to engage a chartered building surveyor, experienced in the field of dilapidations and familiar with the case law, to advise you.
Unless you have completed all the building work which the lease and any licences for alterations require of you then you should expect to receive a Schedule of Dilapidations from your Landlord.
Even if the Landlord does not send you a Schedule of Dilapidations you still have potential dilapidations obligations and a chartered building surveyor can give you advice as to the scope and potential cost of the obligations.
If you do not complete the dilapidations works before the end of the lease term then your landlord can claim damages from you to recompense them for the adverse financial position they find themselves in, because you did not complete the dilapidations works.
6) After the end of the lease term
You should have received a Schedule of Dilapidations and, within about 56 days after the end of the lease, also a Quantified Demand.
However, you should be aware that the landlord’s entitlement to start a court claim will not become legally time-barred for six or 12 years (depending upon how the lease is signed) after expiry of the lease. Some leases contain a specific timescale for service.
The Landlord or their Surveyor should have endorsed the Schedule of Dilapidations to confirm that it is reasonable and reflects the Landlord’s intentions for the building.
You are expected to respond to the Schedule of Dilapidations and/or Quantified Demand within about 56 days of receipt. Your Response should also be endorsed by you or your Surveyor.
Normally, the surveyors appointed by the Landlord and Tenant meet and can narrow the differences sufficiently to recommend a settlement figure to their respective clients.
If such a settlement is not possible then you may be faced with potential litigation from your former landlord. The Dilapidations Protocol states that the parties should consider alternative dispute resolution (ADR) in dilapidations cases.