Schedule of Dilapidations

Explaining Dilapidations

Dilapidations refer to breaches of lease covenants relating to the condition of a leased property. These breaches can encompass a range of issues, including failure to maintain, repair, redecorate, or restore the property as stipulated in the lease agreement. The Schedule of Dilapidations, therefore, serves as a formal record of such breaches and outlines the remedial work required to rectify them.

Types of Dilapidations Schedules

There are primarily three types of Schedules of Dilapidations, each serving distinct purposes and employed at different stages of the lease:

1. Interim Schedule of Dilapidations:
   • This schedule is issued during the term of the lease.
   • It addresses breaches that need immediate attention to prevent further deterioration.
   • It is less common but can be used to ensure ongoing compliance with lease obligations.
2. Terminal Schedule of Dilapidations:
   • Issued towards the end of the lease term, typically within the last few months.
   • It details the repairs and maintenance required to bring the property back to the condition stipulated in the lease.
   • This schedule is crucial in negotiations between the landlord and tenant regarding the end-of-lease obligations.
3. Final Schedule of Dilapidations:
   • Issued after the lease has expired.
   • It provides a detailed account of the outstanding breaches and the cost of remedial works.
   • This schedule forms the basis for any potential claims for damages or compensation.

Legal Framework

The legal foundation for dilapidations in the UK is primarily governed by the Leasehold Property (Repairs) Act 1938 and common law principles. The Act imposes certain constraints on landlords, particularly in relation to repair notices served on tenants with more than three years left on their lease. Both parties must be aware of these legal provisions to ensure compliance and avoid disputes.

Main Elements of a Schedule of Dilapidations

A well-prepared schedule of dilapidations typically includes the following elements:

Description of the Property:

Detailed information about the property, including address, size, and specific areas covered by the lease.

Lease Details:

Key terms of the lease include the lease period, tenant obligations, and specific clauses related to maintenance and repairs.

Itemised List of Breaches:

A detailed enumeration of each breach, specifying the exact nature of the defect or disrepair.

Remedial Works:

A description of the work required to rectify each breach and restore the property to the required standard.

Cost Estimates:

An assessment of the costs associated with the remedial works, often prepared by a qualified surveyor.

Supporting Evidence:

Photographs, inspection reports, and any other relevant documentation that substantiates the identified breaches.

Preparation and Service

A chartered building surveyor typically prepares a Schedule of dilapidations. The surveyor thoroughly inspects the property, identifying any breaches and assessing the necessary remedial work. The schedule is then served to the tenant, usually accompanied by a cover letter outlining the landlord’s expectations and any potential consequences for non-compliance.

Tenant’s Response

Upon receipt of a Schedule of Dilapidations, the tenant has several options:

Acceptance:

The tenant may accept the schedule and undertake the necessary remedial work within the stipulated timeframe.

Negotiation:

The tenant may negotiate with the landlord regarding the scope of the work, cost estimates, or an extension of time for completion.

Dispute:

The tenant may dispute the schedule, challenging the identified breaches, the scope of the required works, or the cost estimates. This may lead to further negotiations or, in some cases, legal proceedings.

Resolution of Disputes

Disputes arising from dilapidation claims can be resolved through several mechanisms:

Negotiation:

Informal discussions between the landlord and tenant are necessary to reach a mutually acceptable resolution.

Mediation:

A neutral third party facilitates discussions between the parties to help them reach a voluntary settlement.

Arbitration:

An arbitrator is appointed to make a binding decision on the dispute based on the evidence presented.

Litigation:

As a last resort, the dispute may be resolved through court proceedings. This can be costly and time-consuming, so resolving matters through alternative means is generally preferred.

Practical Considerations

Both landlords and tenants should consider several practical aspects when dealing with dilapidations:

Early Engagement:

Engaging with the issue of dilapidations early in the lease term can help prevent significant disputes and costs at the end of the lease.

Regular Inspections:

Regular inspections and maintenance can help tenants comply with their lease obligations and avoid unexpected dilapidation claims.

Clear Communication:

Open and transparent communication between landlords and tenants can facilitate a smoother resolution of dilapidation issues.

Professional Advice:

Both parties should seek professional advice from chartered surveyors and solicitors to navigate the complexities of dilapidation claims effectively.

Cost Recovery

Landlords often seek to recover the costs of remedial work from tenants. This can be achieved through:

Self-Help:

The landlord carries out the remedial work and seeks to recover the costs from the tenant.

Financial Settlement:

The tenant agrees to pay a financial settlement in lieu of carrying out the work themselves. This is often negotiated based on the cost estimates provided in the Schedule of Dilapidations.

Conclusion

The Schedule of Dilapidations is a critical tool in managing the condition and value of leased properties.

By understanding its components, legal implications, and practical considerations, landlords and tenants can protect their interests and minimise disputes. Effective communication, regular maintenance, and professional advice are vital to navigating the complexities of dilapidations and achieving a fair and equitable resolution for all parties involved.