As the prospects for rental growth remain subdued, we can anticipate that landlords will increasingly focus on other ways to make money. One of those may be claims for dilapidations. Here are a few common questions which come up relating to dilapidations:
Q – My lease is not up for another five years but the landlord has just served a schedule of dilapidations. Can he do that?
A – Probably yes. Most leases allow the landlord to require dilapidations at any time during the lease and as frequently as the landlord wishes. It would be unusual for the lease to prohibit the landlord from requiring dilapidations until the expiry of the lease. The landlord is normally entitled to have the premises in a constant state of good repair.
2. Q – My landlord is planning to demolish the building after my lease is up, but he is still looking for a dilapidations payment. Can he do this?
A – Probably yes. Often the lease will allow the landlord to require a cash payment in lieu of actual completion of dilapidations – so the landlord may well be able to require the tenant not to do the dilapidations and instead to write a cheque for the value of the dilapidations – which the landlord could put towards the cost of demolition or redevelopment. The tenant could use the tactic of threatening to carry out the dilapidations in advance of expiry in order to frustrate the landlord's ability to require a cash payment instead. That may secure a more attractive negotiated settlement for the tenant.
3. Q – I was a tenant in a multi-let building and my lease has now expired. The landlord is asking me to contribute towards a complete refurbishment of the common parts and the renewal of the M&E systems in the building even although the landlord had not done these works at the time of the expiry of my lease. Can he charge me for that?
A – Probably not. The landlord is normally only able to recover by way of service charge a proportion of costs which were actually incurred during the currency of the lease. It follows that a landlord who wants to be able to get tenants to contribute towards a refurbishment of the building ought to make sure that his plans are sufficiently well advanced that they can be completed and paid for during the currency of the lease.
4. Q – Some of the dilapidations which the landlord is seeking to recover from me are due to defects in design or construction. Surely I can't be asked to pay for these?
A – The tenant can normally only escape liability if there is an express and specific exclusion of latent defects in the tenant's repairing obligation – which would be unusual. Normally the tenant will be responsible for latent defects but may have the benefit of a right of recovery under a collateral warranty from the designer or contractor if this was obtained at the time of the creation of the lease (assuming it has not expired).
5. Q – My lease expired eighteen months ago but I have only just received a dilapidations notice. Is there no time limit within which a dilapidations claim can be made?
A – A prudent tenant would contract on the basis that there should be some cut off to dilapidations claims but this would be unusual in most leases. In the absence of a cut off provision, the landlord's right to require dilapidations would probably only be cut off five years after the expiry of the lease by virtue of the law of prescription. In practice, the landlord will normally seek dilapidations fairly quickly after the lease to avoid evidential disputes as to whether certain items of dilapidation accrued after the expiry of the lease rather than before it.
The outcome of dilapidations issues will depend on the precise wording of the lease, so this cannot be taken as definitive legal advice. However, as most dilapidations claims will involve significant amounts of money, it will always be worth scrutinising the exact wording of a lease to see who is in the right.