ML Guide - Dilapidations on Non-Renewal: the Tenant's Perspective
Dilapidations on Non-Renewal: the Tenant's Perspective
1.0 This ML Guide is for tenants, to explain what to do minimise your liability on expiry or termination date when the tenancy is not to be renewed and the premises are to be yielded up to the landlord - provided non-renewal is not in consequence of landlord’s intention to redevelop.
1.1 Please note the information contained this ML Guide may not or does not apply for purpose of a break clause.
2.0 When the lease requires the tenant to repair and decorate the demised premises, the onus is on the tenant to comply, whether or not reminded by the landlord and, unless specified, regardless of the condition of the property when the tenant took the lease, whether first tenant, assignee or sub-tenant. A tenant is deemed to know what must be done to comply: it is not about waiting to be told.
3.0 On non-renewal on termination or expiry, the tenant must yield up or hand over the property to the landlord in a state of repair and decoration as envisaged by the lease (regardless of the condition before the tenant became the tenant, unless the lease contains a schedule of condition.) The intention is that the landlord should be able to re-ret or otherwise dispose of the premises without the new letting/disposal being in any way prejudiced by the previous tenant’s failure to repair, etc.
4.0 To yield up with vacant possession requires the tenant to remove all chattels and tenant’s fixtures and fittings - e.g, fascia, shelving, alarm systems, false ceilings, carpets, de-mountable partitioning, air conditioning - in fact, anything the tenant put in or annexed to the premises during the tenancy, whether belonging to you or a previous tenant.
4.1 Whether the lease requires you to yield up with vacant possession depends upon the wording in your lease.
4.2 Annexation depends upon the intention with which they were brought into the premises and fixed in position. In principle, an article intended permanent and of lasting benefit to the building would become a fixture, but if temporary a chattel. In removing such items, any damage caused to the structure must normally be repaired. (A popular rule of thumb is to imagine the premises are turned upside down: anything that falls out is likely to be tenant’s fixtures and fittings.)
5.0 The standard, quality and extent of repair and decoration and whether, for example, the obligation includes repair of inherent or original defects, will depend upon the wording in the lease. Because there is no standard wording for repairing obligations in a lease, the law of dilapidations is complex, derived from case law per Court rulings; the interpretation of repairing covenants in a lease part of the process of construction of a lease, having regard to general rules: for example, the intention of the parties, surrounding circumstances, commercial purpose of the document, etc.
6.0 A tenant should carry out works before expiry but, as it may not be feasible to undertake works or remove fixtures and fittings while the premises are open to the public or occupied, the tendency is to carry on trading until the last possible day and, instead of doing works before vacating, sort out the matter afterwards by capital payment to the landlord. On expiry, all keys must be handed over to the landlord so, since a tenant normally has no right of access to carry out repairs or remove items after expiry, the usual approach to resolving dilapidations is to pay damages to the landlord.
7.0 When a tenant does not hand over the property in a state envisaged by the lease, including removal of fixtures & fittings, the landlord has a choice: either to claim damages for putting the property into order and consequential loss during the period of works, or for the landlord to do the work and recover the actual cost from the tenant.
7.1 Damages include the actual/estimated cost of works, VAT (subject to extent of liability or works to be undertaken by the landlord), loss of interest if the property is to be sold or mesne profits (i.e, ‘rent’ at open market value from possession to completion of works), the landlord’s surveyors’ fees (preparing and agreeing the schedule of dilapidations, supervising works, settling the claim for damages, etc), landlord’s legal costs; and business rates and water rates, cost of insuring the building, loss to the landlord of any service charge during the period of works. There will also be your solicitor’s costs and surveyor’s fees for agreeing the schedule of dilapidations and negotiating the claim.
7.2 A schedule of dilapidations is a list of all items of disrepair in the premises, and will normally include an estimate of cost for each item of disrepair. The schedule must state what is wrong: for example, you cannot be obliged to carry out tests to find out if a defect exists - but since leases contain covenants requiring compliance with statutory obligations, checking whether, for example, electrical circuits would obtain a certificate may be necessary. Agreeing the schedule is important before negotiating/settling damages because only works to comply with lease covenants, having regard to business tenancy case law, should be included. It is not unusual for a landlord’s surveyor to try to include items outside the tenant’s responsibility in the lease. For example, if the landlord has a covenant to repair the structure and recover from the tenant a proportion of the cost, then the tenant is not liable for that cost until the landlord has complied with its obligation; also if alterations have been undertaken then whether the tenant is obliged to reinstate the premises would depending upon the wording of the licence to alter.
7.3 A landlord is not obliged to spend the damages on repairing the premises. In attempt to resolve the problem of fairness in measuring damage, Section 18(1) (known as s18) of Landlord and Tenant Act 1927 limits damages to what is known as the “diminution in value of the reversion”: namely the cost of repairs and the difference in value of the property in the condition left by the tenant and its value as if no breach - whichever amount be the lower.
7.3.1 Per s18(1) “Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement. ”
7.3.2 For example, if the cost of repair were £20,000 but diminution in value £10,000 then damages would be limited to the lower amount of £10,000. Conversely, if diminution were £25,000 then damages would be limited to £20,000 cost of repairs. The landlord should not be worse off in consequence of the tenant’s breach, but a landlord may not necessarily be obliged to mitigate loss. If, for example, cost of works were £25,000 but the landlord re-lets the premises at £20,000 pax, the new tenant receiving 3-months rent free, damages could be limited to £5000.
7.3.3 (Lack of repair is not evidence of damage to the reversion: diminution is a technical valuation opinion that is negotiated and agreed with the landlord’s surveyor: for example, depending on market conditions, the value of property could be about the same whether or not in good repair.)
7.4 Please note that, whereas s18 limits damages for repair, decoration is excluded from the definition of repair. Most leases require the tenant to redecorate in the last year of the term and the covenant must be observed even if you had decorated a year or so before and in your opinion the property does not need redecorating. Also, in most leases, there are detailed requirements for decoration that must be followed: for example, two coats of paint, the colour to be used first approved by the landlord.
7.5 The tenant has no legal right to require the landlord to go down the s18 route. If the landlord chooses to carry out the works and recover the full cost from the tenant then the potential limit on cost per s18 does not apply. The landlord is not obliged to accept the cheapest price from a builder but is expected to show value for money, and usually competitive estates are obtained from reputable contractors. Where the landlord intends to carry or the works, the intention should be conveyed to the tenant before expiry of the tenancy/yielding up of the premises.
7.5.1 If the landlord changes its mind then it would have to either claim for damages and be subject to s18, or not bother. (Whether a landlord would bother is entirely a matter for the landlord: after a tenant has yielded up the premises the tenant has no right to re-enter the premises and do any repair, etc.)
7.6 Many leases contain provisions obliging the tenant to remove fixtures, alterations, to reinstate opening in walls, etc if the landlord requires. The landlord must notify you before the end of the lease because you cannot comply with the covenant after the lease has expired. If the landlord has not requested removal before expiration, then there will be no breach. If there is a breach of covenant to remove fixtures or alterations, then the breach is not a breach of the repairing covenant so s18 will not apply. If you have carried out alterations with consent and are obliged to reinstate on termination or expiry, then damages for failure to reinstate would be outside s18.
8.0 Leaving behind unwanted fixtures & fittings can prove expensive: if not removed before vacating, they become the property of the landlord, whereupon if not in good repair or decoration breach of covenant applies. For example, if you were to leave damaged carpets or dirty window blinds/curtains then the cost of cleaning or repairing would constitute breach of repairing covenant, rendering you liable for damages or the landlord paying and then recovering the cost from you.
9.0 If the tenant has a guarantor, then the guarantor’s liability ceases on the tenant giving up possession but remains for claims to date of giving up possession and up to 6 years from that date. Where the tenant intended to renew per the Landlord & Tenant Act 1954, but the tenant then changes its mind and serves Notice to Discontinue Proceedings, the guarantor only remains liable after the contractual expiry when the definition of term in the lease includes statutory continuance.
10.0 A landlord is not obliged to serve a Schedule of Dilapidations before expiry of the lease although the quantum of liability is frozen at the date when possession is given up. The claim can be made at any time, subject to the statute of limitations. Delay cannot count against the tenant in terms of cost of the works and loss of rent sustained. Nor is there any requirement to pre-empt the position as at date of possession: the reasonable period to start is dated from the date of possession. Any deterioration in the property from possession is liability of the landlord, not the previous tenant.
11.0 In the event of a dispute, involving s18, claims can end up in court so a pre-action protocol or procedures is normally followed regardless of the circumstances. If proceedings were commenced then the court would be able to treat the standards in the protocol as the normal reasonable approach to pre-action conduct. Even when the landlord or tenant does not take advice from a surveyor, the protocol should still be complied with.
11.1 The protocol comprises a series of steps to be taken. The first step is for the landlord or landlord's surveyor to inspect the premises, read the lease, and prepare a schedule. The schedule should (a) indicate the breaches of the tenant’s covenants or obligations that have not been remedied at the termination of the tenancy,) b) what in the opinion of the landlord or the surveyor is necessary to put the property into the state required by the terms of the lease and any licences or other relevant documents, and (c) the landlord's costings (that may be based on its estimate or on invoices if the works have been done). The breaches should be separated into categories, repair, reinstatement, redecoration, etc.
11.2 Next the schedule is served, usually by the landlord's solicitor or surveyor. A reasonable time is expected and will vary but generally no more than 56 days after the termination of the tenancy. The landlord may serve a schedule before the termination of the tenancy. However, if it does so it should confirm either at the termination of the tenancy that the situation remains as in its earlier schedule or serve a further schedule within a reasonable time.
11.3 The schedule will also include a claim, setting out and substantiate the monetary sum the landlord is claiming as damages in respect of the breaches, or the estimate cost if the landlord intends to do the work and recover, the claim should include the VAT status; also the fees and costs payable, and the loss of rent, service charge or insurance rent quantified.
11.4 The tenant must respond to the claim within a reasonable time, 56 days is usually considered reasonable. The response should state what works are in the opinion of the tenant or tenant’s surveyor reasonably required for the tenant to comply with the lease.
11.5 The parties’ surveyors are encouraged to meet or discuss within 28 days of service of the tenant’s response. The meetings/discussions are ‘without prejudice’ and the aim is for the parties to agree as many of the items in dispute as possible.
11.6 When a schedule of dilapidations is served before expiry then it pays the tenant to do as much of the repair as it can because the cost of the work and time-table is then under the tenant’s control; you may avoid potential claims for loss of rent and interest, and there may be a financial advantage for VAT when the tenant is VAT registered but the landlord’s property is not. Unless the tenant expects all items listed in the schedule to be necessary per the terms of the lease, then it makes sense to agree with the landlord/landlord’s surveyor what works are necessary before the tenant sets about doing anything. When some but not all the work is done before expiry and giving up the premises, the tenant is exposed to either claim for damages per s18 or the full cost of having the work done.
12.0 Whether you repair or redecorate before expiry, a landlord’s surveyor can always find something wrong. However, it is not open to you to decide whether doing repairs or decorations is necessary based on your opinion of what needs doing or what you would consider reasonable if you were the landlord: the test is the leasing requirement and interpretation of case law so, as the property belongs to the landlord with action at the landlord’s discretion, it pays to budget for the worst. In general, landlords seek damages because they relish a capital sum and prospect of profit on reletting subject to rent-free less than damages received. Whilst the claim should not contain a negotiating margin, scope for reduction depends upon the lease, s18 and understanding landlord psychology.
13.0 Nowadays, I sub-contract dilapidation claims to a reputable firm of chartered building surveyors that specialise in occupancy costs and with whom I have a working association. The lease is read, the premises inspected. The schedule of dilapidations is agreed and damages negotiated with the landlord’s surveyor, liaising with your solicitors as appropriate. (Negotiations can take months. Litigation is threatened and, in dispute, the matter goes to Court or an alternative method of resolution, but amicable settlement generally preferred.)
14.0 Unless the landlord agrees, please remove all tenant’s fixtures & fittings before giving up possession, thus sparing you from having to repair abandoned items. Whether cost-time-effective to rely upon s18 entirely, as distinct from doing some or all works before expiry, depends upon cost of works, diminution in value of the reversion and landlord attitude - expectation from dealings with the landlord may count 0 or whether the landlord has indicated its intention to do the work and recover the full cost.
14.1 Carrying out some works before yielding up reduces the chance of landlord toughness if the premises appear in good order. If the open market is advantageous, then the landlord may want your unwanted fixtures and fittings. If the landlord sells the property, the purchaser could be entitled to the claim. Unless the landlord has said so - always follow up in writing everything said verbally - thinking indifference is your risk. It is not compulsory for the landlord to act immediately on possession, but the longer the delay less the chance of claiming the breach represents significant damage. (If not occupying the premises for some time before giving up possession, then it could pay, if possible, to negotiate surrender, paying a capital sum in full and final settlement.)
15.0 Business tenancy law and case law the on the subject of repair and decoration and dilapidations is extensive.
16.0 Not exhaustive, here is a checklist for your or my action before expiry:
16.1 If the expiry/possession date is not on a quarter day, then no rent is payable for the period after the date of giving up possession. If the landlord demands the full quarter’s rent, then please calculate the rent from quarter day to and including date of expiry/possession and only pay that lower amount (plus VAT if appropriate). The same point applies to the insurance premium and any service charge. If you have paid the insurance then, on giving up possession, write to the landlord for a refund of the premium. (Remember to cancel your own insurances.)
16.2 Contact the landlord or agents and enquire whether there is any objection to your leaving unwanted fixtures & fittings. If not, then confirm conversation in writing immediately and, ideally, obtain receipt or unconditional agreement to avoid any subsequent misunderstandings. Inform landlord/agent that it may be necessary for suppliers of leased fixtures, eg alarm systems, to borrow keys to remove such fixtures. Contact such suppliers and arrange removal.
16.3 Where the lease requires the landlord to approve paint colour or other matters contact the landlord or agents to obtain the approval and request for the response by return so you can make arrangements to do the work. Similarly, if there any reinstatement is required, ask the landlord or agents whether required to do so.
16.4 It is not necessary for the landlord or landlord’s surveyor to inspect the premises before expiry or to serve a schedule of dilapidations before expiry but it may help to know what would be required so you can request a schedule to be prepared and served; however, that would require you to pay the costs.
16.5 The latest time for giving up possession is midnight on the due date. Contact the landlord or its agents a few days beforehand to confirm to whom the keys should be posted by special delivery or delivered by hand/courier. Obtain a receipt if possible. (All keys including internal doors, window locks, etc should be handed over.) Notify police station re change of key holder.
16.6 If not intending to do any works then record the state of the premises, a list of obvious defects and fixtures & fittings left should suffice. If the landlord’s surveyor has not inspected before you gave up possession, then you are at risk from deterioration in the structure or occupation by squatters giving rise to claim of the property in that condition left by you.
16.7 Before expiry, arrange for postal deliveries to another address. Also, electricity and gas meters to be read or take reading and inform utilities of change of address. The telephone to be cut off or number(s) redirected. Cancel newspapers, milk, local deliveries, etc. Turn off water at mains stopcock and switch off electricity power and gas supplies. Lock doors, secure windows and leave premises in clean and tidy condition, removing chattels (eg, goods, stock, etc) your fixtures & fittings (subject to 16.2).
16.8 Write to the Billing Authority to confirm non-liability for business rates from date of giving up possession. If vacating sooner, then write immediately for empty property rates. Give Billing Authority’s landlord’s name and address for demands from date of possession.
For help and guidance at every step of the way, you will find my experience, knowledge and skills invaluable.
To contact me, please email help@michaellever.co.uk or telephone 01531 631892
I look forward to helping you in some way.
Michael Lever
1.1 Please note the information contained this ML Guide may not or does not apply for purpose of a break clause.
2.0 When the lease requires the tenant to repair and decorate the demised premises, the onus is on the tenant to comply, whether or not reminded by the landlord and, unless specified, regardless of the condition of the property when the tenant took the lease, whether first tenant, assignee or sub-tenant. A tenant is deemed to know what must be done to comply: it is not about waiting to be told.
3.0 On non-renewal on termination or expiry, the tenant must yield up or hand over the property to the landlord in a state of repair and decoration as envisaged by the lease (regardless of the condition before the tenant became the tenant, unless the lease contains a schedule of condition.) The intention is that the landlord should be able to re-ret or otherwise dispose of the premises without the new letting/disposal being in any way prejudiced by the previous tenant’s failure to repair, etc.
4.0 To yield up with vacant possession requires the tenant to remove all chattels and tenant’s fixtures and fittings - e.g, fascia, shelving, alarm systems, false ceilings, carpets, de-mountable partitioning, air conditioning - in fact, anything the tenant put in or annexed to the premises during the tenancy, whether belonging to you or a previous tenant.
4.1 Whether the lease requires you to yield up with vacant possession depends upon the wording in your lease.
4.2 Annexation depends upon the intention with which they were brought into the premises and fixed in position. In principle, an article intended permanent and of lasting benefit to the building would become a fixture, but if temporary a chattel. In removing such items, any damage caused to the structure must normally be repaired. (A popular rule of thumb is to imagine the premises are turned upside down: anything that falls out is likely to be tenant’s fixtures and fittings.)
5.0 The standard, quality and extent of repair and decoration and whether, for example, the obligation includes repair of inherent or original defects, will depend upon the wording in the lease. Because there is no standard wording for repairing obligations in a lease, the law of dilapidations is complex, derived from case law per Court rulings; the interpretation of repairing covenants in a lease part of the process of construction of a lease, having regard to general rules: for example, the intention of the parties, surrounding circumstances, commercial purpose of the document, etc.
6.0 A tenant should carry out works before expiry but, as it may not be feasible to undertake works or remove fixtures and fittings while the premises are open to the public or occupied, the tendency is to carry on trading until the last possible day and, instead of doing works before vacating, sort out the matter afterwards by capital payment to the landlord. On expiry, all keys must be handed over to the landlord so, since a tenant normally has no right of access to carry out repairs or remove items after expiry, the usual approach to resolving dilapidations is to pay damages to the landlord.
7.0 When a tenant does not hand over the property in a state envisaged by the lease, including removal of fixtures & fittings, the landlord has a choice: either to claim damages for putting the property into order and consequential loss during the period of works, or for the landlord to do the work and recover the actual cost from the tenant.
7.1 Damages include the actual/estimated cost of works, VAT (subject to extent of liability or works to be undertaken by the landlord), loss of interest if the property is to be sold or mesne profits (i.e, ‘rent’ at open market value from possession to completion of works), the landlord’s surveyors’ fees (preparing and agreeing the schedule of dilapidations, supervising works, settling the claim for damages, etc), landlord’s legal costs; and business rates and water rates, cost of insuring the building, loss to the landlord of any service charge during the period of works. There will also be your solicitor’s costs and surveyor’s fees for agreeing the schedule of dilapidations and negotiating the claim.
7.2 A schedule of dilapidations is a list of all items of disrepair in the premises, and will normally include an estimate of cost for each item of disrepair. The schedule must state what is wrong: for example, you cannot be obliged to carry out tests to find out if a defect exists - but since leases contain covenants requiring compliance with statutory obligations, checking whether, for example, electrical circuits would obtain a certificate may be necessary. Agreeing the schedule is important before negotiating/settling damages because only works to comply with lease covenants, having regard to business tenancy case law, should be included. It is not unusual for a landlord’s surveyor to try to include items outside the tenant’s responsibility in the lease. For example, if the landlord has a covenant to repair the structure and recover from the tenant a proportion of the cost, then the tenant is not liable for that cost until the landlord has complied with its obligation; also if alterations have been undertaken then whether the tenant is obliged to reinstate the premises would depending upon the wording of the licence to alter.
7.3 A landlord is not obliged to spend the damages on repairing the premises. In attempt to resolve the problem of fairness in measuring damage, Section 18(1) (known as s18) of Landlord and Tenant Act 1927 limits damages to what is known as the “diminution in value of the reversion”: namely the cost of repairs and the difference in value of the property in the condition left by the tenant and its value as if no breach - whichever amount be the lower.
7.3.1 Per s18(1) “Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement. ”
7.3.2 For example, if the cost of repair were £20,000 but diminution in value £10,000 then damages would be limited to the lower amount of £10,000. Conversely, if diminution were £25,000 then damages would be limited to £20,000 cost of repairs. The landlord should not be worse off in consequence of the tenant’s breach, but a landlord may not necessarily be obliged to mitigate loss. If, for example, cost of works were £25,000 but the landlord re-lets the premises at £20,000 pax, the new tenant receiving 3-months rent free, damages could be limited to £5000.
7.3.3 (Lack of repair is not evidence of damage to the reversion: diminution is a technical valuation opinion that is negotiated and agreed with the landlord’s surveyor: for example, depending on market conditions, the value of property could be about the same whether or not in good repair.)
7.4 Please note that, whereas s18 limits damages for repair, decoration is excluded from the definition of repair. Most leases require the tenant to redecorate in the last year of the term and the covenant must be observed even if you had decorated a year or so before and in your opinion the property does not need redecorating. Also, in most leases, there are detailed requirements for decoration that must be followed: for example, two coats of paint, the colour to be used first approved by the landlord.
7.5 The tenant has no legal right to require the landlord to go down the s18 route. If the landlord chooses to carry out the works and recover the full cost from the tenant then the potential limit on cost per s18 does not apply. The landlord is not obliged to accept the cheapest price from a builder but is expected to show value for money, and usually competitive estates are obtained from reputable contractors. Where the landlord intends to carry or the works, the intention should be conveyed to the tenant before expiry of the tenancy/yielding up of the premises.
7.5.1 If the landlord changes its mind then it would have to either claim for damages and be subject to s18, or not bother. (Whether a landlord would bother is entirely a matter for the landlord: after a tenant has yielded up the premises the tenant has no right to re-enter the premises and do any repair, etc.)
7.6 Many leases contain provisions obliging the tenant to remove fixtures, alterations, to reinstate opening in walls, etc if the landlord requires. The landlord must notify you before the end of the lease because you cannot comply with the covenant after the lease has expired. If the landlord has not requested removal before expiration, then there will be no breach. If there is a breach of covenant to remove fixtures or alterations, then the breach is not a breach of the repairing covenant so s18 will not apply. If you have carried out alterations with consent and are obliged to reinstate on termination or expiry, then damages for failure to reinstate would be outside s18.
8.0 Leaving behind unwanted fixtures & fittings can prove expensive: if not removed before vacating, they become the property of the landlord, whereupon if not in good repair or decoration breach of covenant applies. For example, if you were to leave damaged carpets or dirty window blinds/curtains then the cost of cleaning or repairing would constitute breach of repairing covenant, rendering you liable for damages or the landlord paying and then recovering the cost from you.
9.0 If the tenant has a guarantor, then the guarantor’s liability ceases on the tenant giving up possession but remains for claims to date of giving up possession and up to 6 years from that date. Where the tenant intended to renew per the Landlord & Tenant Act 1954, but the tenant then changes its mind and serves Notice to Discontinue Proceedings, the guarantor only remains liable after the contractual expiry when the definition of term in the lease includes statutory continuance.
10.0 A landlord is not obliged to serve a Schedule of Dilapidations before expiry of the lease although the quantum of liability is frozen at the date when possession is given up. The claim can be made at any time, subject to the statute of limitations. Delay cannot count against the tenant in terms of cost of the works and loss of rent sustained. Nor is there any requirement to pre-empt the position as at date of possession: the reasonable period to start is dated from the date of possession. Any deterioration in the property from possession is liability of the landlord, not the previous tenant.
11.0 In the event of a dispute, involving s18, claims can end up in court so a pre-action protocol or procedures is normally followed regardless of the circumstances. If proceedings were commenced then the court would be able to treat the standards in the protocol as the normal reasonable approach to pre-action conduct. Even when the landlord or tenant does not take advice from a surveyor, the protocol should still be complied with.
11.1 The protocol comprises a series of steps to be taken. The first step is for the landlord or landlord's surveyor to inspect the premises, read the lease, and prepare a schedule. The schedule should (a) indicate the breaches of the tenant’s covenants or obligations that have not been remedied at the termination of the tenancy,) b) what in the opinion of the landlord or the surveyor is necessary to put the property into the state required by the terms of the lease and any licences or other relevant documents, and (c) the landlord's costings (that may be based on its estimate or on invoices if the works have been done). The breaches should be separated into categories, repair, reinstatement, redecoration, etc.
11.2 Next the schedule is served, usually by the landlord's solicitor or surveyor. A reasonable time is expected and will vary but generally no more than 56 days after the termination of the tenancy. The landlord may serve a schedule before the termination of the tenancy. However, if it does so it should confirm either at the termination of the tenancy that the situation remains as in its earlier schedule or serve a further schedule within a reasonable time.
11.3 The schedule will also include a claim, setting out and substantiate the monetary sum the landlord is claiming as damages in respect of the breaches, or the estimate cost if the landlord intends to do the work and recover, the claim should include the VAT status; also the fees and costs payable, and the loss of rent, service charge or insurance rent quantified.
11.4 The tenant must respond to the claim within a reasonable time, 56 days is usually considered reasonable. The response should state what works are in the opinion of the tenant or tenant’s surveyor reasonably required for the tenant to comply with the lease.
11.5 The parties’ surveyors are encouraged to meet or discuss within 28 days of service of the tenant’s response. The meetings/discussions are ‘without prejudice’ and the aim is for the parties to agree as many of the items in dispute as possible.
11.6 When a schedule of dilapidations is served before expiry then it pays the tenant to do as much of the repair as it can because the cost of the work and time-table is then under the tenant’s control; you may avoid potential claims for loss of rent and interest, and there may be a financial advantage for VAT when the tenant is VAT registered but the landlord’s property is not. Unless the tenant expects all items listed in the schedule to be necessary per the terms of the lease, then it makes sense to agree with the landlord/landlord’s surveyor what works are necessary before the tenant sets about doing anything. When some but not all the work is done before expiry and giving up the premises, the tenant is exposed to either claim for damages per s18 or the full cost of having the work done.
12.0 Whether you repair or redecorate before expiry, a landlord’s surveyor can always find something wrong. However, it is not open to you to decide whether doing repairs or decorations is necessary based on your opinion of what needs doing or what you would consider reasonable if you were the landlord: the test is the leasing requirement and interpretation of case law so, as the property belongs to the landlord with action at the landlord’s discretion, it pays to budget for the worst. In general, landlords seek damages because they relish a capital sum and prospect of profit on reletting subject to rent-free less than damages received. Whilst the claim should not contain a negotiating margin, scope for reduction depends upon the lease, s18 and understanding landlord psychology.
13.0 Nowadays, I sub-contract dilapidation claims to a reputable firm of chartered building surveyors that specialise in occupancy costs and with whom I have a working association. The lease is read, the premises inspected. The schedule of dilapidations is agreed and damages negotiated with the landlord’s surveyor, liaising with your solicitors as appropriate. (Negotiations can take months. Litigation is threatened and, in dispute, the matter goes to Court or an alternative method of resolution, but amicable settlement generally preferred.)
14.0 Unless the landlord agrees, please remove all tenant’s fixtures & fittings before giving up possession, thus sparing you from having to repair abandoned items. Whether cost-time-effective to rely upon s18 entirely, as distinct from doing some or all works before expiry, depends upon cost of works, diminution in value of the reversion and landlord attitude - expectation from dealings with the landlord may count 0 or whether the landlord has indicated its intention to do the work and recover the full cost.
14.1 Carrying out some works before yielding up reduces the chance of landlord toughness if the premises appear in good order. If the open market is advantageous, then the landlord may want your unwanted fixtures and fittings. If the landlord sells the property, the purchaser could be entitled to the claim. Unless the landlord has said so - always follow up in writing everything said verbally - thinking indifference is your risk. It is not compulsory for the landlord to act immediately on possession, but the longer the delay less the chance of claiming the breach represents significant damage. (If not occupying the premises for some time before giving up possession, then it could pay, if possible, to negotiate surrender, paying a capital sum in full and final settlement.)
15.0 Business tenancy law and case law the on the subject of repair and decoration and dilapidations is extensive.
16.0 Not exhaustive, here is a checklist for your or my action before expiry:
16.1 If the expiry/possession date is not on a quarter day, then no rent is payable for the period after the date of giving up possession. If the landlord demands the full quarter’s rent, then please calculate the rent from quarter day to and including date of expiry/possession and only pay that lower amount (plus VAT if appropriate). The same point applies to the insurance premium and any service charge. If you have paid the insurance then, on giving up possession, write to the landlord for a refund of the premium. (Remember to cancel your own insurances.)
16.2 Contact the landlord or agents and enquire whether there is any objection to your leaving unwanted fixtures & fittings. If not, then confirm conversation in writing immediately and, ideally, obtain receipt or unconditional agreement to avoid any subsequent misunderstandings. Inform landlord/agent that it may be necessary for suppliers of leased fixtures, eg alarm systems, to borrow keys to remove such fixtures. Contact such suppliers and arrange removal.
16.3 Where the lease requires the landlord to approve paint colour or other matters contact the landlord or agents to obtain the approval and request for the response by return so you can make arrangements to do the work. Similarly, if there any reinstatement is required, ask the landlord or agents whether required to do so.
16.4 It is not necessary for the landlord or landlord’s surveyor to inspect the premises before expiry or to serve a schedule of dilapidations before expiry but it may help to know what would be required so you can request a schedule to be prepared and served; however, that would require you to pay the costs.
16.5 The latest time for giving up possession is midnight on the due date. Contact the landlord or its agents a few days beforehand to confirm to whom the keys should be posted by special delivery or delivered by hand/courier. Obtain a receipt if possible. (All keys including internal doors, window locks, etc should be handed over.) Notify police station re change of key holder.
16.6 If not intending to do any works then record the state of the premises, a list of obvious defects and fixtures & fittings left should suffice. If the landlord’s surveyor has not inspected before you gave up possession, then you are at risk from deterioration in the structure or occupation by squatters giving rise to claim of the property in that condition left by you.
16.7 Before expiry, arrange for postal deliveries to another address. Also, electricity and gas meters to be read or take reading and inform utilities of change of address. The telephone to be cut off or number(s) redirected. Cancel newspapers, milk, local deliveries, etc. Turn off water at mains stopcock and switch off electricity power and gas supplies. Lock doors, secure windows and leave premises in clean and tidy condition, removing chattels (eg, goods, stock, etc) your fixtures & fittings (subject to 16.2).
16.8 Write to the Billing Authority to confirm non-liability for business rates from date of giving up possession. If vacating sooner, then write immediately for empty property rates. Give Billing Authority’s landlord’s name and address for demands from date of possession.
For help and guidance at every step of the way, you will find my experience, knowledge and skills invaluable.
To contact me, please email help@michaellever.co.uk or telephone 01531 631892
I look forward to helping you in some way.
Michael Lever
Please note that I reserve the right to change, modify or delete any or all of the content of any ML Guides at any time, without notice. You will find the last update at the foot of the page.
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