Understanding Section 18(1)
Section 18(1) sets a legal ceiling on how much a landlord can claim from a tenant for disrepair at the end of a lease. It says that the cost of the works cannot exceed the amount by which the property’s value has been reduced by that disrepair. In other words, if the repairs do not actually make the building more valuable, the claim cannot be inflated beyond the real loss.
This principle protects tenants from paying more than is reasonable and stops landlords from claiming the cost of unnecessary works. It balances the interests of both sides by linking liability to real-world value, not to hypothetical or cosmetic improvements.
The Section 18(1) cap applies to most commercial dilapidations claims. Surveyors use it to calculate whether the landlord’s proposed works would genuinely increase the property’s value. If not, the court reduces the damages accordingly.
When the Cap Applies
Section 18(1) is particularly relevant when the property is due for redevelopment or major refurbishment. If a landlord intends to strip the building out, extend it, or change its use, then much of the tenant’s repair work would be wasted. The law recognises this and limits the claim.
For example, if a landlord plans to demolish a warehouse and build offices, there is no point in forcing the outgoing tenant to repair the roof or repaint the walls. Those works add no value and remain unseen. In that case, the court reduces the landlord’s claim to reflect the true loss, which may be minimal.
The same principle applies when the disrepair does not significantly affect the property’s market value. If repairing the defects would not raise the sale or rental value, then the claim must reflect that reality.
In practical terms, Section 18(1) means that landlords cannot treat a schedule of dilapidations as a shopping list for upgrades. It limits recovery to genuine loss and prevents claims that exceed the building’s actual depreciation.
How Surveyors Assess the Cap
When a claim is disputed, surveyors assess two key figures. The first is the cost of the necessary repairs to return the property to the condition required by the lease. The second is the reduction in the property’s open-market value caused by the disrepair.
If the repair costs exceed that reduction in value, Section 18(1) caps the claim at the lower figure. The process involves valuation evidence, market knowledge, and professional judgement. A chartered building surveyor will inspect the property, review the landlord’s intentions, and consider comparable sales data to establish the true difference in value.
This is where experience matters. An accurate Section 18(1) valuation can mean the difference between a fair settlement and an inflated demand. Tenants benefit from early professional advice so that their position is supported by credible evidence.
Avoiding Common Pitfalls
Both landlords and tenants can misunderstand Section 18(1). Landlords sometimes assume it automatically reduces every claim, but it only applies where disrepair affects value. Tenants, meanwhile, may assume it cancels their liability altogether, which is rarely the case.
The key is evidence. Without clear proof of the landlord’s redevelopment plans or of market value before and after repair, the cap cannot be applied effectively. Engaging a chartered surveyor early helps both sides document the facts and avoid costly disputes later.
It is also important to remember that in theory Section 18(1) applies only to repairs, not to reinstatement obligations such as removing tenant alterations. These are separate matters that must be negotiated on their own terms, but in some circumstances a court will allow these to be covered by a cap too.
The Bottom Line
Capping dilapidations claims through Section 18(1) ensures that liability reflects genuine financial loss, not hypothetical improvement. It protects tenants from unfair costs while still allowing landlords to recover reasonable damages.
Just like the Fiat Punto example, it is about common sense and value. There is no benefit in spending £12,000 to repair something worth £800. The law agrees, and Section 18(1) is there to make sure that logic applies to property as well.
If you are facing a dilapidations claim or preparing to exit a commercial lease, Harrison Clarke Chartered Building Surveyors can help you assess your position, calculate realistic exposure, and negotiate a fair outcome.
For more expert advice on surveying and property matters, check out our range of informative videos on our website or YouTube channel. Harrison Clarke Chartered Surveyors is here to guide you every step of the way!
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