Dilapidations is a term used to refer to breaches of repairing covenants contained within a lease.
As a landlord you can make a dilapidations claim against a tenant who has breached repairing covenants both during and upon termination of lease. The latter is more common.
What should a landlord do?
Taking legal advice at the start of the landlord-tenant relationship ensures the tenant’s repairing obligations are clearly defined in writing, and that both parties understand what they are required to do.
Landlords should also monitor the tenant’s compliance with the repairing covenants during the term of the lease. Leaving everything until the tenant is preparing to move out can leave you on the back foot.
It is also advisable to have a survey of the property done in the lead up to the expiry of the lease. This way you can check whether there have been any breaches of the repairing obligations and minimise the potential for delays when you come to re-let the property.
Essential aspects for landlords to consider
If you are considering serving notices to reinstate, you need to be aware that these are usually time sensitive. It can be crucial to take into account notice periods if you want to trigger an obligation requiring the tenant to take action.
In addition, find out if there is a contractual deadline for service of a schedule of dilapidations. If so, this must be strictly observed, otherwise you could lose your right to bring a claim.
It’s equally important to work in line with the ‘pre-action protocol for claims for damages’ in relation to the physical state of repair at termination (often called the ‘dilapidations protocol’).This sets out the conduct expected of parties to a dilapidations claim. The landlord must serve the schedule of dilapidations in a reasonable time which is usually not more than 56 days after the lease expires.
What can a landlord claim?
Statute provides that a landlord’s claim for breach of repairing covenants is limited to the diminution in the value of its reversionary interest caused by the breach, otherwise know as diminution in value. Assessing diminution in value is a complex exercise and should be undertaken by an expert.
Damages cannot be recovered if the property is to be pulled down, or where structural alterations after the lease expires would make any repairs worthless.
Top tips for landlords
- Instruct a specialist surveyor to prepare a schedule of dilapidations and ascertain the extent of the breaches at an early stage.
- Consider carrying out the repairs yourself, following the tenant vacating. This can give landlords an important advantage because it shifts the burden of proving loss to the tenant.
- Always check the lease. This dictates what you can recover – not only damages but also legal and professional fees.
- Look into alternative forms of dispute resolution. As a minimum, engage in ‘without prejudice’ discussions or consider mediation or arbitration. The courts are eager to see disputes resolved before reaching a court room and efforts to explore alternatives can work in the landlord’s favour.