All dilapidations disputes can ultimately end in court. It is therefore important to protect your position in the event that you eventually commence proceedings so you should take advice early.
How important is timing?
Before the end of the lease you may need to serve Notices on your tenant in order to oblige them to reinstate alterations made to the premises. While your entitlement to start a court claim will not become legally time-barred for six or 12 years (depending on how the lease was signed) after expiry of the lease, the Dilapidations Protocol expects that you will issue a Schedule of Dilapidations and a Quantified Demand within 56 days after the end of the lease term. However, the lease may contain a clause that sets out a specific timetable so you need to check it carefully. If you have sent a Schedule of Dilapidations to the tenant before the end of the lease term you are expected to update it at the end of the lease term.
What do I need to send the tenant?
We can prepare a Schedule of Dilapidations to send to the tenant (the terms of the lease might dictate how it is to be sent). Before we prepare the Schedule of Dilapidations, we need to know what your intentions for the premises are at lease end so we can endorse the Schedule of Dilapidations as required by the Dilapidations Protocol.
How is the schedule of Dilapidations calculated?
The Schedule of Dilapidations will set out the cost of the works the tenant should have completed. The Quantified Demand should not exceed your likely loss. If the tenant’s breaches of lease obligations have not actually caused you to suffer a loss then you must not include those items. Although the reasonable cost of works that the tenant should have undertaken is likely in many cases to be the main guide to the amount of compensation, the law does not allow this to exceed the amount by which the property had been devalued by the breaches.
What happens when the Schedule is served?
The former tenant should send you an Endorsed Response within 56 days of receiving the Schedule of Dilapidations/Quantified Demand. Once you receive the Response you will understand the scope of any disputed items. Normally, we can narrow the differences sufficiently to recommend a settlement figure however if such a settlement is not possible then you may be faced with litigation to recover the damages.
How are disputed resolved?
The Dilapidations Protocol states that the parties should consider alternative dispute resolution (ADR). Surveyor negotiation is an established form of dispute resolution, but the Dilapidations Protocol also requires that the Landlord and Tenant consider ADR. Neither party can be forced to undertake ADR but the court, if the claim is pursued that far, may expect this to have been attempted and unreasonable refusal to do so may be taken into account by the court when considering its award of costs. ADR is a cheaper means of settling the dispute than a court hearing. ADR suitable for dilapidations include Expert Determination (a single expert makes a binding decision) Mediation (the parties, their advisers and a mediator meet, with the mediator trying to broker a mutually acceptable settlement on the day), or Arbitration (a private form of dispute resolution with processes similar to litigation but governed by the Arbitration Act).
What happens if I need to go to Court?
Dilapidations cases can be very complex and potentially very expensive because of the number of experts and specialists that the judge may need to hear from.
Where the Landlord has not completed the dilapidations works but is proposing to litigate to recover damages, a specialist valuation report (diminution valuation) will need to be compiled by a specialist valuer. Other specialists may be required to advise on lifts, air conditioning, cladding and land contamination. Barristers will be engaged to review the case and to act on behalf of each party. Expert witnesses will be required and it is normal for the parties’ surveyors to be engaged as expert witnesses at which point they stop acting for you and start acting for the court.