Dilapidation disputes and claims guide

What are dilapidations?

Dilapidations refer to breaches of lease covenants relating to property condition, typically involving :-

• Repair obligations

• Decoration requirements

• Reinstatement of alterations

Statutory compliance issues

The tenant's specific obligations are determined primarily by the lease terms, interpreted through case law and modified by key legislation—particularly Section 18(1) of the Landlord and Tenant Act 1927, which limits the landlord's recoverable damages.

Why Disputes Arise

Dilapidations disputes commonly stem from:

• Interpretation disagreements - parties often interpret lease terms differently, especially regarding what constitutes "repair" versus "improvement," the definition of "fair wear and tear," and the scope of reinstatement obligations. For example, replacing an outdated but functional heating system might be viewed by landlords as necessary repair but by tenants as an improvement they're not obligated to make.

• Condition assessment conflicts - without detailed documentation of the property's condition at lease commencement, parties may fundamentally disagree about what deterioration occurred during the tenancy. Technical evaluations are inherently subjective—what one surveyor considers normal cracking, another may view as structural disrepair requiring significant remediation.

• Valuation disagreements - even when parties agree on necessary works, disputes often arise over appropriate costs, repair methodologies, and the application of the Section 18(1) valuation cap. Landlords typically prefer comprehensive approaches (full replacement), while tenants argue for more economical methods (patch repairs) that would satisfy lease obligations.

• Procedural failures - technical errors in serving notices, non-compliance with the Dilapidations Protocol, inadequate documentation, or unreasonable timeframes often complicate resolution.

How to prepare for a dilapidations claim

If you are a Landlord :-

• Review lease terms thoroughly to understand the tenant's specific obligations

• Consider instructing a surveyor 6-12 months before lease end

• Potentially serve an interim schedule to allow tenants to remedy issues before vacating

• Conduct prompt inspection upon lease end and serve a properly quantified terminal schedule

• Ensure the schedule complies with the Dilapidations Protocol requirements

• Regularly inspect during the lease term and enforce interim repairs to prevent claim value reduction - see explanation of Section 18(1) cap below.

• Maintain good records and consider the tenant's financial stability when pursuing claims.

• Ensure claims are realistic, properly quantified and focused on genuine breaches.

If you are a Tenant :-

• Document initial condition thoroughly and budget for dilapidations claims from lease start.

• Maintain property consistently and consider completing repairs while still in occupation.

• Review obligations 12-18 months before lease expiry to understand potential liability

• Consider commissioning an independent survey to identify issues early

• Budget appropriately for potential dilapidations costs

• Consider completing necessary works while still in occupation (often more cost-effective)

• Obtain professional advice when responding to schedules, with particular attention to potential Section 18(1) valuation defenses

Ways to settle claims and disputes early

• Early dialogue to establish expectations (ideally 12-18 months before lease end)

• Taking a commercially realistic approach to settlement

• Without prejudice negotiations and alternative dispute resolution

• Scott Schedule approach to systematically narrow disputed items

• Dilapidations Protocol compliance - landlords must provide quantified claims with supporting documentation, tenants must respond comprehensively within 56 days, and both parties must consider ADR. Non-compliance may result in adverse costs consequences.

The Section 18(1) Valuation Cap

Section 18(1) of the Landlord and Tenant Act 1927 provides crucial protection for tenants by capping the landlord's recoverable damages at the diminution (reduction) in the property's value caused by the disrepair. This cap is particularly significant:

• In depressed property markets where disrepair may have minimal impact on value

• Where the landlord intends to redevelop, demolish, or substantially alter the premises

• When proposed repairs would be superseded by other necessary works

The section has two distinct aspects :-

• Damages cannot exceed the reduction in the property's value

• No damages are recoverable if the landlord intends to demolish or substantially alter the premises

Both parties should consider obtaining valuation evidence addressing this statutory cap early in the dispute process, as it frequently leads to settlements significantly below the cost of works in the schedule.