Dilapidations for Landlords: Protecting Your Position at Lease End

Start before the lease ends

The strongest landlord position is built in the final year of the term. An inspection well before expiry identifies the disrepair, reinstatement and redecoration issues while the tenant still has time — and a contractual obligation — to deal with them. During the term, interim schedules can address serious disrepair; approaching expiry, a terminal schedule of dilapidations served before or shortly after lease end frames the claim. Leaving the first inspection until after the tenant has gone usually means lost evidence and a weaker negotiating position.

The schedule and the Dilapidations Protocol

Terminal claims for commercial premises are conducted under the Dilapidations Protocol, the pre-action protocol the courts expect parties to follow. It looks for a schedule served within a reasonable time — the Protocol works to 56 days after termination as the benchmark — setting out the breaches, the works required and the landlord’s costings, endorsed by the surveyor. The landlord is then expected to quantify the loss claimed, and both parties to negotiate before anyone contemplates proceedings. A schedule that is late, inflated or unendorsed invites a procedural counter-attack before the merits are even discussed.

The section 18(1) cap and supersession

Two doctrines discipline every landlord claim. First, section 18(1) of the Landlord and Tenant Act 1927 caps damages for disrepair at the diminution in the value of the landlord’s reversion — if the disrepair reduces the property’s value by less than the cost of the works, the cap bites. Second, supersession: works the landlord intends anyway, such as refurbishment or redevelopment, can eliminate parts of the claim, because remedying the tenant’s breaches would achieve nothing the landlord’s own scheme does not. We prepare schedules and argue the section 18(1) position; where a formal diminution valuation is needed it is a valuation specialist’s work product, and we coordinate with valuers accordingly. Landlords should be candid with their own team about intentions for the building — they will surface.

Evidence that holds up

The claims that settle well are the ones with a clean paper trail: a schedule of condition or photographic record from lease commencement, the lease and any licences for alterations (which determine what reinstatement can be required and whether notice was needed to trigger it), maintenance records, and a costed schedule built on real contractor pricing rather than round numbers. Where a claim heads towards proceedings, expert witness disciplines apply — the surveyor’s duty is to the tribunal, and a schedule prepared with that standard in mind from the outset is far more persuasive in negotiation too.

Settlement strategy

Almost all dilapidations claims settle, and the settlements track credibility. A realistic, evidenced claim served on time tends to recover a sensible proportion quickly; an inflated claim tends to stall, accrue professional fees on both sides and settle no higher. Decisions worth making early: whether the works will actually be done (it affects both the negotiation and the section 18(1) argument), whether a supersession risk exists, and what the property’s next use is. The dilapidations claim should serve the asset strategy, not run ahead of it.

Common questions

When should the schedule be served? Terminal schedules are commonly served in the weeks either side of lease end; the Protocol’s 56-days-after-termination benchmark is the general marker for serving within a reasonable time. Earlier is almost always better for evidence and negotiation.

Can I claim the full cost of the works? Only so far as the law allows: recovery for disrepair is limited to the diminution in the value of the reversion, reinstatement items are measured differently, and items your own plans supersede are vulnerable. A costed schedule is the starting point, not the entitlement.

What about reinstatement of the tenant’s alterations? That depends on the lease and the licence terms — many licences require reinstatement only if the landlord gives notice in time. Check those documents before the final year, not after expiry.