Commercial dilapidations represent one of the most significant financial risks for both commercial tenants and landlords at lease end. At West End Surveyors, our dilapidations specialists regularly help clients navigate this complex area, where understanding lease obligations can mean the difference between thousands or tens of thousands of pounds in costs.
This comprehensive guide explains what dilapidations are, how they work, and how both tenants and landlords can protect their interests in commercial property leases across West End London and beyond.
What Are Dilapidations?
Dilapidations refer to breaches of lease covenants relating to a commercial property's condition, typically the tenant's obligation to repair, maintain, and reinstate the property. When a commercial lease ends, landlords often prepare a "schedule of dilapidations" identifying breaches and claiming compensation for remedial works.
The term encompasses three main types:
- Disrepair: Failure to maintain the property in good condition as required by repairing covenants
- Decorative condition: Failure to decorate to required standards
- Reinstatement: Failure to remove alterations and return the property to its original state
Commercial dilapidations claims in West End London routinely reach £50,000-500,000+ depending on property size, lease terms, and breach severity.
Types of Dilapidations
Terminal Dilapidations
Terminal dilapidations occur at lease end when the tenant vacates. This is when most dilapidations claims arise, as landlords assess the property and prepare schedules identifying all breaches during the tenancy.
Interim Dilapidations
Interim dilapidations are claims made during the lease term, typically when rent reviews occur or when the landlord believes significant breaches warrant action before lease end. These are less common but can be valuable tools for landlords to ensure ongoing compliance.
Diminution in Value vs. Cost of Works
A crucial concept: landlords can only claim compensation representing the actual loss suffered, not necessarily the full cost of remedial works. If the landlord plans to demolish or substantially refurbish, the diminution in value may be much less than repair costs.
The Dilapidations Process
Stage 1: Schedule of Dilapidations
Within reasonable time after lease end (typically 56 days), the landlord's surveyor prepares a schedule of dilapidations detailing:
- Each breach of lease covenants
- Description of remedial works required
- Cost estimate for each item
- Total claim amount
As West End Surveyors dilapidations specialists, we prepare comprehensive schedules supported by photographic evidence, specifications, and contractor quotes.
Stage 2: Quantified Demand
The Dilapidations Protocol requires landlords to serve a quantified demand within reasonable time (usually 56 days of lease end), stating:
- The actual sum claimed as compensation
- Whether the landlord intends to carry out works
- Whether diminution in value or supersession applies
Stage 3: Scott Schedule Response
The tenant's surveyor responds with a Scott Schedule—a detailed line-by-line response to each dilapidations item, challenging:
- Whether breaches occurred
- Interpretation of lease obligations
- Cost estimates
- Whether items should be superseded
At West End Surveyors, we regularly act for tenants, providing robust Scott Schedule responses that can reduce claims by 30-70%.
Stage 4: Negotiation
Most dilapidations claims settle through negotiation, avoiding court proceedings. Experienced dilapidations surveyors from both sides work toward pragmatic settlements reflecting genuine breaches and actual loss.
Stage 5: Court Proceedings (if necessary)
If settlement can't be reached, litigation may follow. However, courts expect parties to follow the Dilapidations Protocol and engage in meaningful negotiation before resorting to legal action.
Key Legal Principles
Section 18 Limitation
The Landlord and Tenant Act 1927 Section 18 caps damages at the diminution in the property's reversion value caused by breaches. If the landlord plans demolition or substantial refurbishment, the diminution may be minimal, dramatically reducing valid claims.
Supersession
If the landlord's intended works would supersede items in the dilapidations schedule (i.e., the remedial works wouldn't actually be carried out because they'd be replaced by landlord's works), these items shouldn't be claimed.
Betterment
Landlords can't use dilapidations to improve the property beyond the condition required by the lease—no "betterment" at tenant's expense.
Common Lease Covenants
Understanding your lease obligations is critical. Common covenants include:
Full Repairing and Insuring (FRI) Leases
The tenant is responsible for all repairs, maintenance, and insurance. These place maximum liability on tenants and are common in commercial property.
Internal Repairing Obligations
Tenant repairs internal areas only, with landlord handling structure and exterior. Common in multi-let buildings.
Qualified Covenants
Repair obligations "subject to the provisio concerning fair wear and tear" reduce tenant liability for gradual deterioration from normal use—but tenants must still prevent consequential damage.
Decoration Covenants
Often require repainting every 3-5 years and at lease end. Specifications typically require professional decorator standards.
Alterations and Reinstatement
Many leases prohibit alterations without consent and require reinstatement at lease end. This can mean removing fitted kitchens, partition walls, air conditioning, and returning to shell condition—extremely expensive for tenants.
Practical Advice for Tenants
1. Understand Your Lease from Day One
Review repairing and reinstatement obligations before signing. Have a building surveyor conduct a schedule of condition at lease start, identifying existing defects—you won't be responsible for these.
2. Maintain Throughout the Tenancy
Don't defer maintenance. Small repairs become major defects, and years of neglect create substantial dilapidations liability.
3. Get Landlord Consent for Alterations in Writing
Even with consent, check whether reinstatement is required. Try negotiating consent without reinstatement obligations.
4. Consider Strategic Surrender
If you're leaving early, negotiating surrender with the landlord may be cheaper than fulfilling dilapidations obligations.
5. Instruct a Specialist Surveyor Early
Don't wait for the landlord's schedule. Engage a dilapidations surveyor 6-12 months before lease end to assess likely liability and potentially complete some works cost-effectively.
6. Challenge Inflated Claims
Initial dilapidations schedules often include questionable items. A robust Scott Schedule response from experienced surveyors like West End Surveyors can significantly reduce exposure.
Practical Advice for Landlords
1. Serve Interim Schedules
Don't wait until lease end. Interim schedules during the tenancy encourage compliance and evidence ongoing breaches.
2. Be Realistic About Claims
Inflated schedules damage credibility. Focus on genuine breaches with realistic costings. Consider your actual intentions—if refurbishing substantially, your claim will be limited by Section 18.
3. Act Within Time Limits
Serve schedules promptly (within 56 days of lease end is best practice). Delays weaken claims and may breach the Dilapidations Protocol.
4. Consider Tenant's Circumstances
Pragmatic negotiations often achieve better outcomes than aggressive litigation. Reasonable settlements secure cash faster than court proceedings.
5. Document Property Condition
Comprehensive photographic and written evidence at lease end supports claims. Without good evidence, disputes become difficult and expensive.
Frequently Asked Questions
When should tenants instruct a dilapidations surveyor?
Ideally 12 months before lease end to assess likely liability and plan cost-effective solutions. At minimum, instruct a surveyor immediately upon receiving the landlord's schedule—don't wait.
Can landlords claim for improvements or betterment?
No. Dilapidations claims are limited to restoring the property to the condition required by the lease—no improvements beyond this at tenant expense.
What is a terminal schedule of condition?
A detailed photographic and written record of the property's condition at lease end, forming the basis for dilapidations claims. It's distinct from an initial schedule of condition created at lease start.
Are dilapidations claims negotiable?
Yes, absolutely. Most claims settle at 30-60% of the initial schedule amount through negotiation. Experienced dilapidations surveyors are essential for achieving favorable settlements.
How long do landlords have to claim dilapidations?
Landlords have 6 years from the breach date (typically lease end) to pursue claims through litigation. However, best practice is serving schedules within 56 days of lease end.
Case Study: West End Office Dilapidations
A client leased 5,000 sq ft of office space in Covent Garden under an FRI lease. The landlord's initial dilapidations schedule claimed £180,000 for:
- Internal redecorations: £45,000
- Removal of partitions and reinstatement: £65,000
- M&E repairs: £35,000
- Floor coverings replacement: £35,000
West End Surveyors' Scott Schedule response challenged:
- Decoration costs as excessive (quoted realistic contractor rates)
- Partition removal as the landlord planned full CAT A refurbishment (supersession)
- M&E items as not tenant's responsibility under lease terms
- Floor coverings as beyond reasonable wear and tear obligations
After negotiation, we settled at £55,000—saving our client £125,000 and avoiding litigation costs.
Conclusion
Commercial dilapidations are complex, high-stakes matters requiring specialist knowledge of lease interpretation, building pathology, and negotiation strategy. Whether you're a tenant facing a substantial claim or a landlord seeking to recover legitimate costs, experienced RICS dilapidations surveyors provide invaluable guidance.
At West End Surveyors, our dilapidations team acts for both landlords and tenants across West End London's commercial property market. We understand the technical, legal, and commercial aspects of dilapidations, delivering pragmatic advice that protects our clients' interests.
Facing a dilapidations claim or preparing to serve one? Contact West End Surveyors for expert advice from our specialist dilapidations surveyors.