A Landlord’s Guide to Dilapidation Surveys

A Landlord’s Guide to Dilapidation Surveys

What is Dilapidation? 

If a tenant vacates a property on expiry of a lease, they are required to put the property into a condition which complies with their lease obligations. The procedures and process around this issue is referred to as dilapidation (schedule of dilapidation). 

What is my tenant liable for? 

Leases include lease covenants that tenants have to adhere to. The obligations that need to be reviewed when reviewing a tenant’s liability are: repair, decoration, reinstatement and items associated with statutory compliance. The legal jargon contained within leases can be vague and it is preferable to appoint a building surveyor or solicitor to interpret the phrasing.  

There is a number of additional legal document which will need to be reviewed as part of the process as these will impact a dilapidation claim, these include schedule of condition and licence for alterations.. 

As a landlord, your approach to dilapidation will depend upon what your intentions are for the property. You may wish to let the building after completing the dilapidation works; significantly develop the property; look to obtain cash settlement; or in all likelihood review various options and undertake a combination of the above options. What is proposed for the building will have a major impact on claim.

What is the dilapidation survey process? 

A landlord may have instructed a dilapidation liability assessment to understand what the tenant’s likely liability is. If this has already been undertaken then it may be reviewed and updated to reflect the current condition. 

More often than not this is not something which has been produced and therefore a landlord will need to instruct a building surveyor to produce a schedule of dilapidation (dilapidation survey). This is typically produced within the last 12 months of a tenant’s lease and then updated post lease expiry. A landlord may then serve the schedule of dilapidation on to the tenant and commence negotiations (a landlord may withhold the schedule dependent on their tactics). 

What are the tactics available? 

A landlords approach to dealing with a dilapidation matter may differ greatly dependent upon their intentions for the building. Some of the typical tactics or main considerations are as follows: 

Play it with a straight bat: If the landlords intentions are to undertake the works as set out in the schedule of dilapidation and the tenant has not undertaken any works to the property then it is recommended that the landlord’s surveyor negotiates and agrees the items within the schedule, competitively tenders the works, appoints a contractor and undertakes the works. With this option it is imperative that the landlord’s building surveyor maintains communication with the tenant/tenant’s surveyor and obtains some sort of assurance that the tenant will pay the agreed figure once the works are done. The only risk is that the tenant changes their mind once the works are being undertaken/have been complete. The landlords may have to then go through litigation which can be costly and time consuming.  

Try and push the tenant to undertake the works: As with the above option, if the landlord wants the works to be undertaken then they may try to persuade the tenant to undertake as much of the work as possible. This will then reduce the time between the tenant returning the property and the property being ready to be re-let. The issues with this option are that a landlord cannot force a tenant to complete any works, and that the landlord will have limited control over the quality of workmanship. 

Pocket the cash: A landlord may look to negotiate and agree a cash settlement to cover of the dilapidation matter. It may be that a landlord can re-let or sell on the property without undertaking any works. They will then be able to pocket the cash and use this for other investments/development. It must be noted that the landlord only suffers a loss if the dilapidation works are undertaken, therefore a tenant’s surveyor can often be hesitant to agree a cash settlement without any works being undertaken. 

Keep it on the down-low: A landlord may be considering significantly refurbishing or redeveloping the property. There are a number of protections available to a tenant if this is the case which will significantly reduce what a landlord can recover as part of the dilapidation claim. If this is the landlord’s intentions it is beneficial to not express their intentions and agree a speedy settlement. 

Push for a lease renewal: Another consideration is to try and push the tenant into renewing their lease. If the dilapidation claim is quite significant then the tenant may be hesitant to vacant the premises, especially if they have associated costs of moving and occupying new premises. It may be that the dilapidation claim provides sufficient persuasive to make the tenant renew their lease. 

We hope you found this blog helpful, you can also check out our dilapidation survey checklist. At Commercial Building Surveyors, we offer Dilapidation surveys in the following parts of the UK: Dilapidation Survey Bristol, Dilapidation Survey London, Dilapidation Survey Manchester, Dilapidation Survey Cardiff.

Or you can head straight here for more information about: Schedule of Dilapidation