Holly Minney
Dispute Resolution
Commercial Property Dilapidations; End of Term Claim
Dilapidation claims arise where a tenant has failed to comply with the repair and maintenance obligation within a lease.
The most common time for a landlords to make a claim for dilapidations is at the end of the term of the lease.
Where a claim for dilapidation is made at the end of the term, the only remedy available to the landlord is damages.
The amount that is recoverable by way of damages is limited by two factors.
- The common law principle for the assessment of damages
- Section 18 (1) of the Landlord and Tenant Act 1927 (‘The Statutory Cap’)
The Common Law Principle
The measure of damages under this principle is the reasonable cost of putting the property back into the condition in which it ought to have been left by the tenant, plus the loss of rent and other losses the landlord suffers whilst they rectify the disrepair.
The Statutory Cap
- First Limb – This first limb limits damages by an objective test—the amount by which the landlord’s reversion has diminished in value owing to the breach. Where the landlord has done or intends to do the work, the cost of carrying out the work is the starting point for assessing the diminution. This applies whether the work is to be done by the landlord personally or by an incoming tenant. However, the statutory cap provides the upper limit.
- Second Limb – This second limb applies where it can be shown that the property will be pulled down or structurally altered at or shortly after the end of the lease. Its effect may be to extinguish the landlord’s claim for damages.
Related insights
Janeet Jawanda
Callum Hall
Holly Minney, Head of Dispute Resolution at Mullis & Peake, said:
“There is a specific pre-action protocol to be followed before issuing a claim for dilapidation to commercial property. Our team are experienced with the issue of these letters of claim and the handling of dilapidation claims. Dilapidation claims continue to arise in many commercial leases, both landlord and tenants need to be aware of their obligations, and tenants should consider their repair obligation before vacating a property.”