What should I do if I’m issued with a Schedule of Dilapidation

What is a Schedule of Dilapidation? 

A Schedule of Dilapidations is a document that is produced either near to the time of lease expiry or shortly after lease expiry in order to provide a robust assessment of the breaches of a tenant’s lease obligations. The Schedule of Dilapidations will include commentary on the relevant lease obligations and then schedule out the itemised breaches and the works required in order to remediate the breach. Normally the Schedule of Dilapidations will also include budget costs to enable the tenant’s liability to be quantified. 

What should I do when I receive a schedule of dilapidation? 

A Dilapidations Survey will normally be undertaken by a Commercial Building Surveyor with the view of producing a Schedule of Dilapidations. On receipt of a Schedule of Dilapidations it is suggested to review the contents to ensure it is meant for yourself and that all necessary legal items are correct. This can often be done by reviewing the lease you have for the property and associated documentation such as Schedules of Condition, Licence for Alterations, Licenses etc. It is imperative to ensure you have copies of these legal documents as they are key to understanding your liability in relation to Delaps. 

The next stage will be to appoint trusted professionals on your behalf, including a Commercial Building Surveyor. A Commercial Building Surveyor can review the Schedule of Dilapidations and other associated documentation and provide a fee proposal for acting on your behalf in undertaking a Dilapidations Survey and responding to the Schedule of Dilapidations. The process and complexities of dilapidations are not straight forward and a Commercial Building Surveyor will be able to discuss options for dealing with the Schedule of Dilapidations, including undertaking all or some of the works, negotiating elements of the claim, and agreeing a cash settlement.

What are my options for concluding dilapidations? 

The chosen options for resolving a dilapidations claim will depend on a number of factors including the time available, a tenant’s financial position, a tenant’ s intentions for staying in/exiting a property, a landlord’s intentions for the property and many other items. The principal outcomes are likely to be as follows, although quite often the concluding position may involve a combination of the following:

Negotiate a lease renewal: If the tenant is intending on staying in the premises then they will more often than not negotiate a lease renewal. The Schedule of Dilapidations can be reviewed as part of the lease renewal negotiations as there may be an opportunity to reduce a tenant’s dilapidations liability, or the landlord may request some or all of the works to be undertaken as part of the lease renewal. However, it may be possible to defer a tenant’s dilapidations liability until the end of the new lease term. 

If the intention is to exit the property, then the following are likely to apply:

Undertaken works: If there is sufficient time before lease expiry, it may be that the tenant wishes to undertake works to the building in order to comply with their lease obligations and complete the works that would be included in a Schedule of Dilapidations. As a breach of a lease obligation only occurs on the day of lease expiry it may be that the tenant can complete a sufficient scope of works in order to significantly reduce any Dilapidations Claim, or to negate any reason for a Schedule of Dilapidations to be produced. The benefits of their are that the tenant may be able to complete the works for a lower cost than the landlord and it will reduce the risk of claims for consequential losses and professional fees. 

Financial Settlement: Should there be insufficient time to carry out the works, or if the tenant has no desire to complete the dilapidation works, then a Commercial Building Surveyor will likely be engaged on behalf of both parties to negotiate the contents of the Schedule of Dilapidations in regard to the items included and the associated costs. The negotiate is aimed at agreeing a reasonable cash settlement that represents that actual loss incurred by the landlord. A Commercial Building Surveyor has a good understanding of applicable case law, costs and market conditions to enable them to robustly negotiate any claim. 

A combination of the above: Quite often, a combination of some works and a residual cash settlement are how dilapidations claims are concluded. A package of works will be undertaken which is based upon what the tenant’s representative believes the landlord will undertake, or what they consider are a reasonable level of works in order to comply with the tenant’s lease obligations. Any outstanding works can then be dealt with by way of a cash settlement.  

Wait and see approach: An alternative approach is to assess what the landlord’s intentions are for the property. There are numerous protections for a tenant should a landlord redevelop a building or not undertake some/all of the works included in a Schedule of Dilapidations. These protections can reduce the landlord’s claim which in turn could mean that a tenant is not liable to pay the landlord as much as they may be initially claiming.  

There are pros and cons to all the proposed options for progressing/concluding a Schedule of Dilapidations, and it is recommended to discuss these in detail with a commercial building surveyor who can advise accordingly. 

We hope you found this blog helpful, we offer Dilapidation Surveys in the following parts of the UK: Dilapidation Survey Bristol, Dilapidation Survey Exeter, Dilapidation Survey Swindon, Dilapidation Survey Cardiff.

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