If you lease a commercial building, the lease almost certainly says what condition it has to be in when you hand it back. Dilapidations is the process of working out what falls short, what it costs to put right, and who pays. Handled early, it is usually straightforward. Left to the last few weeks, it becomes expensive.
What “dilapidations” means
Dilapidations are breaches of the repair, reinstatement and decoration obligations in a commercial lease. Most leases ask the tenant to keep the property in repair, decorate it at set intervals and at the end of the term, and remove any alterations they made, unless the landlord agrees otherwise.
When those obligations haven’t been met, the landlord can ask the tenant to put things right, or claim the cost of doing so. The claim is normally set out in a schedule of dilapidations, a document prepared by a building surveyor that lists every item, the clause of the lease it relates to, the work needed and, usually, a cost.
The different schedules
You’ll come across a few different documents, and they do different jobs.
| Document | When | What it does |
|---|---|---|
| Schedule of condition | Before the lease starts | Records the state of the building on day one, often with photos. If the lease refers to it, the tenant usually doesn’t have to hand the building back in better condition than this. |
| Interim schedule | During the lease | Lists repairs the landlord wants doing while the lease is still running. |
| Terminal schedule | In the last part of the lease, or after it ends | Lists everything that needs doing to meet the lease at the end of the term. This is the one most dilapidations claims are based on. |
| Scott schedule | During negotiation | The terminal schedule with extra columns for the tenant’s response and agreed figures, so both sides can narrow down the differences line by line. |
Tip for incoming tenants: a photographic schedule of condition agreed at the start of a lease is the cheapest dilapidations protection there is. It is far easier to agree what was already wrong on day one than to argue about it ten years later.
What a schedule usually covers
Most items fall into four groups:
- Repair. Roofs, gutters, cladding, windows, doors, floors, walls, ceilings and building services that are in disrepair.
- Reinstatement. Removing the tenant’s alterations, such as partitions, mezzanines, racking fixings, signage and cabling, and making good, where the lease or licence for alterations requires it.
- Redecoration. Internal and external decoration, often “in the last year of the term”, which the landlord’s surveyor will check against the lease wording.
- Yielding up. Clearing out the tenant’s equipment, furniture and waste so the property is handed back with vacant possession.
On industrial units, the items we see most are worn or damaged floors, holes from racking and machine fixings, damaged roller shutter doors, impact damage to cladding and steelwork, blocked drainage, failed roof lights, and removal of offices and mezzanines added by the tenant. On offices, it tends to be partitions, damaged ceiling tiles, carpets, kitchens and tea points, data cabling and redecoration.
How claims are limited
A landlord can’t simply recover whatever the schedule says. Two things shape what is actually payable in England and Wales.
Section 18(1) of the Landlord and Tenant Act 1927
Damages for breach of a repairing covenant can’t exceed the amount by which the value of the landlord’s interest in the property has gone down because of the disrepair. And if the landlord plans to demolish the building, or alter it so much that the repairs would be pointless, no damages are payable for those repairs. This is why surveyors talk about a “diminution valuation” on larger claims.
The Dilapidations Protocol
The pre-action protocol for dilapidations claims sets out how both sides are expected to behave before anyone goes to court. In short, the landlord should send the terminal schedule within a reasonable time after the lease ends (the protocol suggests generally within 56 days), and the tenant should respond within 56 days of receiving it. Both sides are then expected to meet, exchange information and try to settle.
The detail matters and every lease is different, so take advice from a building surveyor or a property solicitor on your own position. Our role is the practical one: pricing and carrying out the works.
Should a tenant do the works or pay the claim?
This is the question most outgoing tenants ask us. There is no single right answer, but these are the points that usually decide it.
Doing the works yourself
- You control the cost, because you appoint and pay the contractor directly.
- You avoid the landlord’s surveyor’s fees and any loss-of-rent claim for the time the landlord would need to do the works after you leave.
- The works have to be finished before the lease ends, which needs planning, especially if you’re still trading from the building.
- Works should follow the schedule and the lease, and be recorded properly, otherwise the landlord may still claim for items they consider unfinished.
Paying a settlement
- You hand back the keys and walk away, with no works to manage.
- It can make sense if the landlord plans to refurbish or redevelop anyway, which may reduce what is recoverable.
- Settlements are often negotiated by surveyors over several months after the lease ends.
Break clauses need extra care. If your lease has a break clause that is conditional on complying with your covenants or giving vacant possession, unfinished works or items left behind can put the break at risk. Get legal advice early and leave enough time to finish the works properly before the break date.
A sensible timeline
For a typical industrial unit or office, this is a practical way to run it:
- 12 to 18 months before lease end: read the lease and any licences for alterations, and find the schedule of condition if there is one. Ask a building surveyor to advise.
- 6 to 12 months before: ask the landlord whether they want alterations removed, and whether they will serve a schedule. Get the works priced.
- 3 to 6 months before: agree the scope, book the contractor and plan the works around your move-out.
- Final weeks: carry out the works, keep before-and-after photos of every item, and arrange a joint inspection with the landlord’s surveyor before you hand back the keys.
For landlords: getting the property ready to let
For a landlord, the end of a lease is also the start of the next one. A few things are worth thinking about while the property is empty:
- Energy performance. Since 1 April 2023, landlords in England and Wales generally can’t continue to let a non-domestic property with an EPC rating below E unless a valid exemption is registered. Reinstatement works are a good moment to tackle lighting, heating and insulation upgrades.
- Combining works. If you receive a settlement instead of the tenant doing the works, combining the dilapidations items with a wider refurbishment can save time and money.
- Speed to market. Every empty month costs rent and business rates. A contractor who can start quickly and run trades in parallel shortens the void.
How we price dilapidations works
We price item by item, following the schedule’s own numbering, so the landlord’s surveyor, the tenant’s surveyor and the client can all check the price against the schedule. We then programme the works backwards from the date the property has to be handed back, and keep photographic records of every item before and after.
We work across Leeds, Wakefield, Bradford, York, Harrogate and the rest of Yorkshire, for tenants, landlords and the surveyors acting for them. See our dilapidations works page for more, or send us the schedule and the lease end date.
