Dilapidations generally refer to items of disrepair that are covered by repairing covenants contained in a lease. The term is often used, as shorthand for terminal dilapidations, to cover breaches of the tenant’s covenants relating to the physical state of the premises when the lease ends.
The landlord will normally instruct his surveyor to prepare a schedule of dilapidations a few months before the end of the lease. The lease often permits the landlord to claim a sum for loss of rent for the time the landlord is unable to let the property while repair works are carried out after the tenant leaves. The schedule will then be served on the tenant and the tenant must decide how to respond. Options include having the work done to cure the defects recorded or to try to achieve a monetary settlement with the landlord. If no settlement is achieved, there is a pre-action protocol for court actions for dilapidations claims. The aim of the protocol is to encourage the resolution of disputes over breaches of tenant repair obligations at the end of a commercial lease, without recourse to litigation. If this process does not achieve a settlement, then the tenant will be faced with a legal action and if it has provided a rent deposit, it will be held until the claim is concluded.
We recommend that a tenant should make a provision in their accounts annually for the dilapidations liability at the end of the lease.
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