Schedule of Dilapidations

What is a Schedule of Dilapidations?

A schedule of dilapidations is a document, which is typically served on a tenant by a landlord either during, towards the end of, or following expiry of a lease. The purpose of a schedule of dilapidations is to provide a report that outlines the tenant’s lease obligations that have been breached at lease expiry, and will often include associated budget costs for rectifying these breaches.

The schedule of dilapidations should be an accurate reflection of the breaches and associated remedial works. However, parties can interpret lease obligations differently and their views on what should be included in a schedule of dilapidations may differ. The schedule of dilapidations is normally the start of the process that will often lead to the requirement for works to be undertaken and/or a financial settlement to be agreed.

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What is included in a Schedule of Dilapidations?

A schedule of dilapidations will include a number of different elements. Firstly, the schedule of dilapidations will include a preamble outlining the various lease obligations, which are application to the schedule of dilapidations. The schedule of dilapidations will also include the surveyor’s endorsement confirming that the schedule of dilapidations has been prepared in accordance with protocol and in line with the surveyors understanding of the landlord’s intentions for the property.

The next section of the schedule of dilapidations is the actual schedule, which is normally provided in tabular format including an item number, reference to the applicable lease obligation that has been breached, a description of the breach and proposed remedy, and then a budget cost. Following this, the schedule of dilapidations will include a summary page outlining all applicable costs, including professional fees etc.

Finally, the schedule of dilapidations will include a Quantified Demand. This will only be included in the schedule of dilapidations if the schedule of dilapidations is issued after the lease expiry.

When do you need a Schedule of Dilapidations?

It is best practice for a landlord to instruct a schedule of dilapidations at least a year prior to lease expiry. The schedule of dilapidations will assist the landlord with understanding the likely condition that the property will be returned in and enable them to make suitable plans for the building.

Likewise, a tenant should also complete a schedule of dilapidations assessment a year or so prior to lease expiry. The schedule of dilapidations will provide an assessment of the tenant’s anticipated liability and will enable them to plan for lease expiry, whether this is to procure and undertake the works included in the schedule of dilapidations or put in place suitable funds to agree a financial settlement.

Why do I need a Schedule of Dilapidations?

A schedule of dilapidations is fundamental as it starts the dilapidations process and makes both parties aware of the condition of the property and the breaches that have occurred. The schedule of dilapidations helps to quantify this liability and serves as a basis for negotiations or for agreeing a suitable scope of works to remediate these breaches. The contents of the schedule of dilapidations can also be used to assist with lease negotiations/renewals and other landlord and tenant matters.