Interim vs. Terminal Schedule of Dilapidation

Interim Schedule of Dilapidations vs. Terminal Schedule of Dilapidation

Dilapidations is a legal matter that occurs at lease expiry and is in place to make sure that a property is yielded up in accordance with a Tenant’s lease obligations, or that a landlord is suitably compensated if has not been. The procedure of dilapidations takes place at the end of lease (terminal schedule of dilapidations). Sometimes the dilapidations process can occur during the lease term (interim schedules of dilapidations). Some commercial building surveyors refer to a final schedule of dilapidations which is a schedule of dilapidations that is issued following lease expiry.

What are the differences between an Interim and Terminal Schedule?

When are they prepared?

An interim schedule of dilapidations is typically issued anytime up to two years prior to the end of a tenants lease term.

A terminal schedule of dilapidations can be prepared and issued during the final 2 years of a tenant’s lease term although more often than not it is issued within the final 12 months of a lease term. A terminal schedule of dilapidations is often updated post lease expiry to ensure that the contents align with the breaches that have occurred on the date of lease expiry.

A final schedule of dilapidations is prepared after lease expiry. A survey should be undertaken as soon as possible following lease expiry as the contents of the schedule should approximately reflect the state of the property at lease expiry.

What is included?

An interim schedule of dilapidations should not include all items of disrepair and breaches of the lease owing to the tenant still being in occupation. The interim schedule of dilapidations should only include works related to the following:

• Works which if not undertaken will result in further degradation of the asset
• Works required to achieve statutory compliance
• Works that if not undertaken then will result in the works costing more in the near future

The items will unlikely include cyclical repair and redecoration and reinstatement of tenant’s alterations.

A terminal/final schedule of dilapidations will include all items which are breaches of the tenant’s lease obligations. These will most likely be repairs, redecoration, reinstatement of alterations and items required to achieve statutory compliance. The extent of works will vary depending on the condition of the property and the lease obligations.

Are budget costs included?

An interim schedule of dilapidations does not normally incorporate any costs as the intention is to get the tenant to complete these works.

A terminal/final schedule of dilapidations will include budget costs to assist with understanding the likely financial claim that will be made and to assist with negotiating a potential financial settlement. These budgets may be updated following lease expiry, and also updated if actual contractor costs are obtained.

How are they resolved?

Appropriate legal advice should be obtained prior to serving either an interim schedule of dilapidations or a terminal/final schedule of dilapidations to ensure that all legal matters are picked up at the relevant time.

Interim schedule of dilapidations require slightly more consideration than terminal schedules of dilapidations owing to there being various legal mechanisms for getting the tenant to complete these works, or enabling the landlord to access the property to complete the works. Sometimes it may be better to issue a repairs notice as opposed to an interim schedule of dilapidations. In most cases the intention is to get the tenant to complete the works outlined in the schedule or as minimum a proportion of these works.

A terminal/final schedule of dilapidations will either result in the tenant completing some or all of the works prior to lease expiry, or will result in the landlord undertaking some or all of the works and recovering the loss as part of a financial settlement. The recovery of costs and negotiation of the scope of works can be protracted and therefore it is key to engage a commercial building surveyor to assist.

We undertake Commercial Building Surveyors Services throughout the UK including Schedules of Dilapidations. We can undertaken your instruction in Schedule of Dilapidations Bristol, Schedule of Dilapidations Swindon, Schedule of Dilapidations Exeter, Schedule of Dilapidations Plymouth and Schedule of Dilapidations Bath.