Dilapidation disputes and claims guide

Dilapidations claims arise when a tenant fails to meet their lease obligations to repair, reinstate, or redecorate commercial premises. While commonly pursued at lease expiry, they can also arise during the term, particularly in connection with break clauses, where a landlord may challenge compliance as a way to invalidate the break.

Dilapidations can also be used tactically by landlords to gain leverage in lease renewal or exit negotiations. Whether you’re a landlord seeking to protect the value of your asset or a tenant looking to limit exposure, early legal and technical advice is key to managing risk and achieving a fair outcome.

Dilapidations claims can relate to :-

• general repair obligations

• decoration obligations

• reinstatement of alterations

Tenant's obligations with dilapidations

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 For example, replacing an outdated but functional heating system might be viewed by landlords as necessary repair but by tenants as an improvement they're not obligated to make.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.

Solicitors for dilapidations disputes and claims

Our experienced and specialist team advise landlords and tenants, including with :-

• Reviewing Lease Terms – Clear analysis of repairing obligations, reinstatement clauses, and alterations provisions.

• Advising on Strategy – Practical, commercial advice for landlords or tenants to resolve claims efficiently and proportionately.

• Instructing Surveyors – Coordinating with specialist building surveyors to prepare or respond to a schedule of dilapidations.

• Compliance with the Protocol – Ensuring all steps follow the Dilapidations Protocol to avoid procedural missteps.

• Negotiation and Settlement – Managing pre-action discussions to reach cost-effective settlements and avoid unnecessary litigation.

• Dispute Resolution – Representing clients in court or alternative dispute resolution if agreement cannot be reached.

• Exit Planning – Advising tenants pre-lease expiry on minimising exposure, or landlords on preparing and preserving claims.