Written by Nathan Chalmers, Commercial Property team
Dilapidations are one of the most common causes of dispute at the end of a commercial lease.
They can involve significant financial claims and often come as a surprise to tenants, while landlords do not always recover what they expect.
Below are answers to some of the most frequently asked questions about dilapidations and how they work in practice.
What are dilapidations?
Dilapidations are breaches of a tenant’s obligations under a commercial lease relating to repair, redecoration, reinstatement or compliance with statutory requirements. These obligations govern the physical condition of the property during the lease and at its end. Whether a landlord can successfully bring a claim depends on the wording of the lease.
When do dilapidation claims usually arise?
Dilapidations claims most commonly arise towards the end of a lease term or after the lease has expired. In some cases, interim claims can be made during the lease. A landlord may require the tenant to carry out the necessary works before the lease ends or may seek to recover the cost of those works after the tenant has vacated.
What repairing obligations can a tenant be responsible for?
Most commercial leases place repairing obligations on the tenant, but the extent of those obligations varies. Some leases impose a full repairing obligation, meaning the tenant must keep the property in good repair regardless of its condition at the start of the lease. Other leases limit this obligation by reference to the property’s condition at the commencement of the lease.
Repair obligations can cover a wide range of issues, including structural defects, worn flooring, damaged ceilings, broken fixtures, defective services, and deterioration caused by lack of maintenance. Disputes often arise over whether an issue amounts to disrepair or is simply fair wear and tear.
Do tenants have to redecorate at the end of a lease?
Many commercial leases require tenants to redecorate at specified intervals and again at the end of the lease. These obligations may apply only to internal areas or may extend to external parts of the building. Failure to comply with redecoration requirements can form part of a dilapidations claim even where the property appears to be in reasonable condition.
What happens to alterations made during the lease?
Tenants often carry out alterations such as installing partition walls, additional cabling, signage, or kitchen facilities. Leases commonly require tenants to reinstate the property to its original layout at the end of the tenancy. Where alterations were carried out under a licence for alterations, the reinstatement obligations will usually be clearly set out. If reinstatement is required but not completed, the landlord may include the cost of those works in a dilapidations claim.
Can statutory compliance issues be included in a dilapidations claim?
Yes. Many leases make the tenant responsible for ensuring compliance with statutory requirements throughout the lease term. This can include obligations relating to fire safety, asbestos management, electrical testing, and other health and safety matters. Where compliance has not been maintained, remedial works or investigations may be included in a schedule of dilapidations.
How does the dilapidation process work?
The process typically begins with the landlord or their surveyor preparing a schedule of dilapidations. This document identifies the alleged breaches of the lease, the remedial works required, and often includes estimated costs. If the tenant does not complete the works before the lease ends, the landlord may pursue a monetary claim, sometimes referred to as a quantified demand, which may include the cost of works, professional fees, and in some cases, loss of rent.
Are there limits on what a landlord can recover?
There is an important legal limit on dilapidation claims for disrepair. Under section 18(1) of the Landlord and Tenant Act 1927, damages are capped at the amount by which the disrepair has reduced the value of the landlord’s interest in the property. This means a landlord cannot automatically recover the full cost of repairs, particularly where the property is to be redeveloped or substantially altered.
How can tenants limit their dilapidations exposure?
One of the most effective ways to limit exposure is to agree on a schedule of conditions at the start of the lease. This is typically a photographic record of the property’s condition at commencement. When properly incorporated into the lease, it can prevent a tenant from being required to return the property in a better condition than it was at the outset.
Why is early advice important?
Dilapidations are technical and often require both legal and surveying expertise. Early engagement, careful review of lease obligations, and realistic negotiation can significantly reduce risk, avoid unnecessary costs, and help both landlords and tenants manage the end of a commercial lease more effectively.
At Howell Jones Surrey solicitors, we advise both landlords and tenants based on their individual circumstances and their business priorities.
Whether you are negotiating a new lease or reviewing an existing one, please contact our commercial property solicitors in Surrey by telephone on 0800 011 9813 or by email to nathan.chalmers@howell-jones.com for practical, expert advice tailored to your needs.
