How to make a Dilapidations Claim in 2024?

Commercial leases often lead to disputes between landlords and tenants regarding the property's condition and associated rights and duties. Our team will provide a clear overview of the dilapidation claims process, ensuring you have the necessary knowledge to handle any problems. Our aim is to equip you to tackle any issues with confidence. 

What is a Dilapidation Claim? 

A dilapidations claim is a dispute between a commercial landlord and tenant regarding compliance with repair, reinstatement, and redecoration obligations during the lease. Swift action is necessary to prevent these claims from escalating and leading to costly court battles.

Types of Dilapidations Claims

Landlords have two types of dilapidated claims: interim and terminal. Interim claims are made during the lease to ensure tenants comply with their obligations, and any non-compliance is dealt with swiftly. Terminal claims are made after the lease has ended to rectify any breaches, determine the costs of remedial work, and cover any financial losses such as professional fees, loss of rent, and payment of service charges and utility rates.

Who can start a Dilapidations claim?

A dilapidation claim must always be started by the Landlord

What evidence do you need to bring a Dilapidations claim?

In any disputes related to dilapidations, as per the Civil Procedure Rules, the Dilapidations Protocol must be followed. Landlords must immediately hire a surveyor to inspect the property and generate a 'schedule of dilapidations' as the protocol mandates.

The schedule of Dilapidations

The primary purpose of a schedule of dilapidations is to protect a property's value by ensuring its condition remains intact. It is crucial to assess the entire building's condition, from its integral structure to its minor damage. A terminal or final schedule of dilapidations must outline the necessary repairs and estimate the costs to avoid much more costly repairs later on if left untreated.

To avoid unexpected costs at the end of a lease, an interim dilapidations schedule may be issued early in the lease, reminding the tenant of what repairs must be carried out by the end of the lease. If dilapidated repairs are not completed by the end of the lease, a tenant may face a quantified demand for a dilapidated claim.

Tenants must assess the validity of the schedule of dilapidations against the required obligations of the tenant stated in the lease before responding. They should verify the costs, if provided as quotes. The tenant may benefit from the services of a chartered dilapidations surveyor to ensure compliance with their obligations and avoid any potential disputes.

How to make a Dilapidations claim?

The Dilapidations Protocol provides a clear and concise roadmap for the court's expectations regarding the process for a dilapidations claim. It is important to note that the protocol specifically applies to terminal dilapidation claims, not interim claims. While there is no established procedure for interim claims, landlords should strongly consider following the protocol when pursuing such claims unless outlined in the lease.

The Process for Making a Dilapidations Claim?

After receiving a schedule of dilapidations and Quantified Demand from the landlord, the tenant must respond within 56 days, clearly stating whether they agree or dispute the alleged breaches and remedial works specified. The landlord, tenant, and their professional advisors must meet on a 'without prejudice' basis within 28 days to resolve the dilapidation claim or narrow the issues in dispute. Alternative dispute resolution processes such as mediation, early neutral evaluation, or expert determination should be considered if necessary. If a settlement cannot be reached, the landlord must provide a detailed quantification of losses through a formal diminution valuation or an account of actual or expected expenditure and financial costs. There is no room for hesitation or ambiguity in complying with these guidelines.

If a tenant fails to undertake repairs, the landlord has the right to claim for the loss in value of their property. To do so, the landlord must confirm any defense related to a diminution in value within 56 days of receiving a detailed quantification of losses. This confirmation must be made using Section 18, allowing valuations to be prepared. After this, the parties must take a moment to assess the situation before the landlord proceeds with submitting their claim for determination by the court.

How long does the landlord have to make a dilapidation claim?

The landlord must serve the schedule of dilapidations upon the tenant within 56 days of the end of the lease. However, it is essential to note that this is not simply a suggestion. Failure to comply with this requirement may result in legal consequences. As a claim for breach of contract, the landlord has up to 6 years (or potentially 12 if the lease is also a deed) to pursue legal action. Therefore, the schedule of dilapidations must be served within the specified timeframe to avoid any potential legal complications.

As a Tenant, can I challenge a Dilapidations claim?

As a tenant, you have the right to challenge a dilapidations claim from your landlord. Upon receiving the schedule of dilapidations, it is crucial to take immediate action. You must provide a formal response within 56 days, addressing each item in the schedule and explaining why you disagree. Our commercial property dispute solicitors can assist you in challenging the claim.

If the schedule of repair costs appears excessive compared to the property's actual loss in value, you should object to it as soon as possible. We recommend instructing your surveyor to inspect the property and provide a valuation if necessary. Do not hesitate to take action to defend your rights as a tenant.

Who has to pay for the costs of a Dilapidations claim?

Tenants who fail to maintain the property or restore any alterations will be held liable for all remediation costs and may be subject to damages for lost rent during the repair process. In the event of legal action, the losing party will bear significant costs and fees, and the court will consider each party's adherence to the protocol when determining who is responsible for paying these expenses. Compliance with the protocol is crucial and will directly impact the outcome of any legal proceedings.

How can we prevent commercial property disputes in the future?

To minimize or prevent disputes in the future, landlords must ensure that the lease is properly drafted by a commercial property solicitor from the outset. Clauses must be unambiguous to avoid any confusion, and what constitutes wear and tear versus damage must be explicitly stated. Regular physical inspections of the property should also be maintained, with proper notice given to the tenants and any potential issues addressed early on. Taking these steps will ensure a smooth and hassle-free tenancy.

Conclusion

It is strongly advised that both landlords and tenants seek professional advice at an early stage regarding dilapidation claims. These claims can quickly escalate and become complex and time-consuming. Failure to seek professional advice could result in significant financial and legal consequences. Therefore, taking proactive measures to address dilapidated claims is crucial to protect your interests.