Are you a landlord or tenant involved in commercial property dilapidations?
We can provide you with the right legal advice and access to specialists to resolve your case quickly and robustly.
If you’re coming to a break or exit in your commercial property lease you may encounter a lease dilapidation claim actioned under Section 18 (1) of the Landlord & Tenant Act 1927. These claims are becoming more common given shortened leases or tenants acting on break clauses rather than renewing leases. This revision of commercial terms can lead to the landlord seeking to redress the loss of income through serving a dilapidation claim identifying breaches of covenant to repair, decorate and reinstate a tenant’s alterations.
To be sure that dilapidation cases are not over or under settled, landlords and tenants need both building surveyors and valuers’ input. To avoid compromising the outcome for landlord or tenant these cases require two distinct sets of chartered surveying disciplines from the outset.
A chartered building surveyor will use their expertise to identify breaches of covenants to repair, decorate and reinstate tenant’s alterations, and put together a cost for these remedies. However, the chartered valuation surveyor (Valuer) whose expertise is in property valuation, is the only discipline of surveyor qualified to advise to what extent the law capping damages to the lower of the Cost of Remedial Works, or impact on the Property’s value, affects the outcome. Section 18 (1) of the Landlord & Tenant Act 1927 provides a statutory cap on repairs, with similar caps applying at common law to both decorations and reinstatement. As such, the ‘Diminished Value (DV) cap’ can, and usually will, impact the entire claim.
These statutory caps are in place because, in most cases, the impact on the ‘value’ of a property of breached clauses to repair, decorate and reinstate is less than the (lowest feasible) ‘cost’ of doing the remedial works. Also, many of claimed remedial works are either not actually done in practice or will be ‘superseded’ (undone/destroyed by planned improvement and upgrade works), so will be used as an academic example to support the claim rather than taking place in reality.
Most second-hand commercial properties reach a point in targeted expenditure beyond which a landlord can keep on spending in order to achieve perfect compliance, but no more will be added to – or recovered in – value. Which is the reason why astute, informed and skilfully produced Diminution Valuation reports are key to securing the correct outcome in dilapidations negotiations.
The above might sound very tenant biased, however, the Dilapidations Protocol dictates that landlords must obtain and produce a Section 18 Valuation to support a dilapidations claim in respect of which only some (or indeed none) of the claimed works are to be done. It’s therefore in the landlord’s interest to have an objective and skilfully composed Section 18 report, both to maximise the fair outcome for them, and indeed to rebut an opportunistic Section 18 Valuation presented on behalf of the former tenant.
Our legal team work with both building surveyors and valuers; together, on every case from the outset. This ensures confidence both for tenants, that settlement figures are being minimised, and for landlords, that expectations are being realistically managed, whilst still robustly pursuing maximum settlements.
If you’re a landlord or tenant needing advice and support for a lease dilapidation claim, click here to make an appointment for a free 30-minute consultation to discuss your case.