Dilapidations are elements of disrepair arising through the Tenant being in breach of the repairing obligations of the lease.
When a commercial lease ends the Landlord is entitled to damages equal to the cost of repairs that the Tenant should have carried out (as well as, depending on the market conditions at the time, loss of rent for the period it takes to carry out the works to put the property into repair). The Landlord and Tenant Act 1927 reins this in somewhat by imposing a cap on this amount equal to the diminution in value to the Landlord’s interest in the property caused by the Tenant’s breaches.
So, if the Tenant leaves the premises in disrepair, the Landlord can rightly sue the Tenant for the cost of putting the premises back to the condition required by the lease. In determining the amount which a Landlord can recoup from the Tenant the procedure is to ask:
a) What was the scope of the Tenant’s repair obligation under the lease?
b) What was the reasonable cost of putting the building back into the condition which it should have been in if the Tenant had sufficiently performed on this repair obligation?
c) What is the difference between the value of the building in its actual condition at the expiry of the lease and the condition in which it should have been left if the Tenant sufficiently performed his repair obligation? (the age, character and locality of the building are relevant factors here).
Doubtless, every dilapidations claim will be reliant on the wording of the lease itself and the individual facts of the case. Landlords will be well advised at the outset to consider the above procedure before entering dilapidations disputes with former Tenants. Not all of the work required to make the premises fit for re-letting will fall within the Tenant’s repair obligation and such costs will be irrecoverable by the Landlord. It is therefore important to seek advice as early as possible in relation to dilapidations so that the Landlord is in the best possible position to weigh the options and limits of a dilapidations claim.
Philip Jacques, Trainee Solicitor
For further advice on dilapidations or any other aspects of commercial property contact our Real estate team.