The Dilapidation Survey
A Dilapidation Survey builds a comprehensive account of the condition of a building from surface staining to structural components - ideal before letting, terminating, constructing or demolishing a building.
In order to inspect a property your Dilapidations Surveyor will need to make access arrangements. This is especially important in such circumstances where the lease has been broken or forfeited, to ensure no issues of waiver of rights arise.
The surveyors should also have access to the terms of the lease at such a stage. See the "Documents relevant to a dilapidation survey" section below for further documentation requirements.
A dilapidation survey should enable a Chartered Building Surveyor to create a proportionate record of breaches. This record can then be used to calculate quantities and costs. As a tribunal or court proceedings could occur a significant length of time after the dilapidations survey, the surveyor should accurately record the condition of the property.
Photographs, videos, measurements, recordings and general notes from a dilapidations survey should therefore be kept at least until the dilapidations dispute has been resolved.
note: Where opening up is required, and the tenant has appointed the Chartered Building Surveyor, then the surveyor must obtain consent from the landlord before undertaking such invasive inspections.
Appointing a dilapidations surveyor
Top surveyors will have a solid background knowledge of legal and factual advice and will therefore be able to describe how your dilapidations dispute may be affected by existing frameworks and precedent.
A Chartered Building Surveyor should be objective, honest, polite, constructive and professional.
It's important that you, as a client, should understand the dilapidations process too. You should put the time in to read through RICS consumer guide to dilapidations.
Considerations for a dilapidations dispute
Early and thorough consideration should be given to alternative dispute resolution, and offers to settle.
The potential need for specialist lettings and valuation advice, and the impact of litigation and pre-litigation costs and limits on recovery of costs.
Documents relevant to a dilapidation survey
Surveyors do not give legal advice although they can offer interpretations of contractual provisions in general, as well as relevant lease clauses. As such, surveyors should obtain relevant documentation and clarify any grey areas asap.
Naturally, for leasehold dilapidations the surveyor should have complete copies of the lease.
Other documents which may be requested by the surveyor as applicable are as follows:
- Sub-leases and head lease
- Other relevant agreements in writing
- Schedules of condition, together with appropriate photographs
- Scaled plans and consents for alterations with plans and specifications
- Relevant applications for consent
- Reinstatement notices
- Agreement for lease
- Assignments and licences to assign
- Notices under the Landlord and Tenant Act 1954, and statutory notices relating to the property
- Original or current letting or investment sale details, evidence of rental values and yields and statement of the landlord’s intentions.
Schedules of Dilapidations and Scott Schedules
See our schedule of dilapidations page for further information.
Dilapidations during the lease term
The right to forfeit the lease can be waved by a landlord (or it's agents) if they take any step that recognises the continuing existence of the lease, such as accepting rent, or demanding rent.
This is a powerful note to be aware of, especially where there the tenant has made alterations, although it may not be relevant in such cases where the breach is a repair covenant (i.e. an ongoing agreement to maintain the property)
If there is a an ongoing maintenance agreement left unfulfilled by the tenant, then the landlord may pursue remedy in the form of 'Specific Performance'. This is very rarely used unless it is a matter of urgency, easily defined, and there are no alternatives (such as access to the property to do work).
Many leasehold agreements stipulate that should a tenant not carry out their duties, then the landlord has the right to enter without consent. This is often referred to as a Jervis v Harris clause after the 1996 court case.
Landlords should exercise extreme caution using a Jervis vs Harris clause. Covenants include notice periods, trespassing and breach of quiet enjoyment of the property. A landlord should pursue legal advice before embarking on such a path. Metcalfe Briggs recommend using unbiased.co.uk to find a relevant local legal advisor / solicitor.
It is possible that the landlord will then be able to recover their costs as debt.
Note: The Leasehold Property (Repairs) Act 1938 sets limitations on the landlords remedies with regards to forfeiture of lease and/or damages where the leasehold agreement was for 7 years or more and 3 or more years remain.
Dilapidations at the end of the lease term
Seeking damages is usually the only remedy available after lease end. These would be referred to as terminal dilapidations.
Speaking broadly, any damages should be able to compensate the landlord for loss. This might be the cost of works (see Schedule of Dilapidations for various ways in which this can be calculated) or Diminution in Value.
Diminution of Value is the reduction in interest gained from the landlord as a result of the tenants breaches.
Settlement of disputes
By ascertaining the landlords intentions with the property in the long-term (i.e. alternative uses) it is possible to supersede the breaches in the lease where the intentions contradict the breach being claimed.
In other words, if the landlord plans on realising an alternative use for the property, and such alternative use realises a greater property value than an in-compliance property in it's current use case, then disrepair claims for the current loss of value could be superseded.
Both the courts and RICS encourage meeting throughout a dispute, in order to agree aspects of it if possible, and to clarify the specific areas breached. Reducing the number of outstanding issues is absolutely a step in the right direction in such instances.
Dilapidations claims against landlords
The tenant can't really enforce the landlord's contractual obligation to make repairs unless notice has been given in writing. It's important that the notice of breach contains sufficient evidence that works are required. It isn't necessary to send through the exact details or the work required to remedy the dilapidations.
Once instructed to act in such a case, a Chartered Building Surveyor would necessarily take many of the same actions required when a landlord claims against a tenant:
If the breach is simple then a Schedule of Dilapidations might not be needed.
If multiple breaches are claimed by the tenant then producing a schedule of dilapidations might be the best course of action.
A tenant who remains in the property after servicing notice of contractural breach to the landlord may claim for inconvenience, damage to personal belongings, damage to the property and even loss of profits.
A tenant who leaves the property might claim for the cost of moving, redecorating, loss of profits and even the cost of alternative accommodation.
The tenant is entitled to claim for the damages that would put them in the same position financially as if the breach had not occurred. This is even true if they sublet when they've vacated, as they can claim the difference between the price for rent and the price they earn when subletting.
Deduction from Rent
Deduction from rent, also known as 'Set-off', might be a way the tenant wishes to recover damages. Unfortunately some leases can exclude this right entirely, so you'll absolutely need to check your contract before taking this route.
Carrying out remedial works as a tenant is a high-risk strategy. The landlord can counter claims of cost towards such work by stating that the tenant had no express right to do so, and/or adopted the wrong methods.
As mentioned above in 'Dilapidations during the lease term' it is possible that the court would order specific performance by the landlord of his obligation to make repairs.
After the Damages, Set-Off, Self-Help or Specific Performance remedies have been agreed, settlement can hopefully be reasonably discussed through to solution without a further need for solicitors.
Diminution valuations (a.k.a. loss in value of the property)
The starting point is market value, taking into account the potential for alternative property uses, and the market reaction to the availability of the property when it was marketed.
Documents would then be gathered, including the freehold (or leasehold) title, the schedule of dilapidations (or Scott Schedule), and associated photographs, details of any works carried out, the Chartered Building Surveyor's description of the property, advice from the Chartered Building Surveyor on the cost of redevelopment work that the valuer considers relevant.
Diminution valuation method
Referencing comparable properties, one in repair and one out of repair. This can be difficult as it assumes that the effect on value by the breaches can be isolated.
Valuing the property itself in and out of repair. This is the primary approach, and what most would assume to be the best cause of action.
The compliant value (i.e. before breaches occurred) may be exceeded by the value realised by a change of use. This could lead to supersession of the breaches.
Diminution valuation Report
Diminution valuation reports should show calculations and conclusions clearly. Changes to the scope of remedial works should be taken into account as they can affect the Scott Schedule or Schedule of Dilapidations, which in turn are variables within the property's value function.
Many negligent actions can arise from advisers failing to spot time limits or conditions on break clauses. Metcalfe Briggs Chartered Building Surveyors would obtain and read the lease, when instructed in connection with a break clause.
Serving break notices is a specialised legal task and should not be dealt with by a Chartered Building Surveyor.
Contact us today to discuss dilapidations and breaches in lease covenants and we will gladly assist you.