What is Dilapidations?

Full Definition

Dilapidations refers to breaches of a tenant's repairing, decorating and reinstatement obligations under a commercial lease, and to the process and claims that follow from those breaches, typically arising at or near the end of the lease term when the landlord inspects the property and compares its condition against what the lease required. Most commercial leases place clear repairing obligations on the tenant, often requiring the property to be kept (and handed back) in the same condition as recorded in a schedule of condition at the start of the lease, or to a general standard of good repair, along with obligations to redecorate periodically and to remove any tenant alterations and reinstate the property to its original layout before leaving. During the lease, a landlord can serve an "interim schedule of dilapidations" flagging breaches and requiring the tenant to remedy them while still in occupation; at lease end, a "terminal schedule of dilapidations" sets out the landlord's claim for the cost of putting right outstanding breaches, prepared by a chartered building surveyor and usually following the pre-action protocol for claims for damages in relation to the physical state of commercial property at termination of a tenancy, which encourages early exchange of information and negotiation before court proceedings. Critically, a dilapidations claim is a claim for damages, not simply the cost of repair works: under section 18(1) of the Landlord and Tenant Act 1927, the landlord's damages are capped at the diminution in the value of the landlord's interest in the property caused by the disrepair, meaning if the landlord intends to demolish or substantially redevelop the building regardless of its condition, the claim may be reduced or extinguished entirely, since the disrepair caused the landlord no actual loss in value. Tenants nearing the end of a lease often commission their own surveyor's report and budget a dilapidations provision in advance, or negotiate a financial settlement with the landlord instead of carrying out the works themselves, since a cash settlement can be quicker and avoids disputes over the standard of remedial work.

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