Dilapidations

By Terry Bartholomew

Dilapidations is the term used to describe claims made by landlords against tenants when a lease of land or property comes to an end, either through natural passing of time or by operation of a break clause or a surrender.

A dilapidations claim will detail the tenants’ alleged breaches of covenant by reference to the lease and typically this will include breaches relating to the state of repair, decoration and reinstatement of alterations.

The general principle is that at the end of a lease a landlord is entitled to have the property returned in a state of repair and decoration consistent with the lease covenants and so that the property can be remarketed at market value.

If a tenant fails to do this then the landlord can be faced with costs associated with both putting the property into a suitable state of repair and decoration but also loss of rent etc for the period this work takes.

Addressing dilapidations is therefore very important and timing is crucial if the tenant wants to avoid additional claims for losses.

If the landlord wants to lease or dispose of the property, then it is good practice to organise for a dilapidations inspection and schedule to be drawn up and served before lease expiry so that the tenant is fully aware of what the landlord considers to be necessary to comply with covenants.

If the tenant addresses the claim during the term of the lease and to the landlord’s satisfaction then there should be no dilapidations claim at lease end, however, if the tenant does not do so, and the lease expires, the matter becomes a claim for damages. Alternatively, the landlord has the option of pursuing a financial settlement with the tenant to conclude any claim and to provide both parties with certainty at lease end.