Leasehold legal issues

Schedule of dilapidations

Schedule of dilapidations

The liability of a tenant to repair property is one of the potentially most burdensome obligations under a lease.  This usually becomes evident at the end of the lease term.

  • At the end of the lease term the landlord is likely to send his surveyor to the property to look over its condition in order to ascertain whether there have been any breaches of repairing and other covenants.  The surveyor will also check whether there are breaches of covenants to reinstate alterations or whether there has been a failure to comply with the usual clause requiring compliance with statutory obligations.
  • The landlord’s surveyor will then usually produce a ‘schedule of dilapidations’ which is a list of alleged items of disrepair at the property, and sometimes details of breaches of other list obligations as well.
  • In the case of breach of repairing obligation, the liability of the tenant is limited to the loss in value of the premises to the landlord that is caused by the failure to comply with the obligation.
  • The loss in value is often the cost of carrying out repairs, and can sometimes be evidenced by monies that the landlord has laid out in doing so.
  • This is far from always the case however.  The repairs for various reasons may not increase the value of the property by as much as they cost to carry out.  Generally there are a number of reasons why a tenant may not immediately settle what the landlord says is the tenant’s liability at the end of the lease.
  • The schedule of dilapidations often contains items that the tenant is not obliged to repair under the terms of the lease.  It is important therefore to look at the lease and ascertain what is included in the letting.
  • The schedule of dilapidations often states that items are in a state of disrepair when they are not, and may claim that the tenant must reinstate alterations that were in fact carried out by a previous tenant or owner of the property.
  • The landlord often omits to notify the tenant if their obligation to repair is limited rather than a full repairing obligation. [Repair]
  • The estimated cost of remedying the breaches of obligation on which the compensation claimed by the landlord is based is often overstated when the landlord has not carried out the works.
  • Where the landlord has carried out works and is using the cost of doing so as evidence of loss, it is highly possible that  the cost will include elements of improvement making it more expensive than the cost of simply repairing as required by the lease.  The landlord will not be entitled to the additional cost of this.
  • The loss of value to the landlord’s property may in any event be less than the cost of carrying out remedial works.  This will often depend on the market for that type of property as it is currently laid out.
  • If the property is to be demolished the landlord will not be entitled to compensation and to the extent that substantial works are to be carried out by the landlord that would render repair pointless, compensation should be adjusted downwards.
  • The landlord may well be prepared to haggle in order to obtain early payment from the tenant.