What is a Schedule of Dilapidations?
Receiving a schedule of dilapidations as a tenant can be a scary experience, especially if you haven’t seen one before. So let’s start with the basics. A schedule of dilapidations is a document that spells out the relevant legal clauses of your contract. Alongside a list of breaches of the lease and proposals of how you can set them right. Normally, we’d expect this list to be reasonable. Think, fixing a broken window or replacing a worn-out carpet. But some surveyors can get a bit overzealous, and complain about an un-shiny doorknob, or (and we saw this recently), a slightly rusty but perfectly functional gate hinge. Yes, really.
If served around lease end, most schedules also include cost estimates for completing each repair item. Landlords usually base their financial claim on these costs if the tenant doesn’t complete the works. It doesn’t sound too bad on the surface. But construction work can be expensive Once you tally all the individual breaches and add surveyors’ fees, loss of rent, and VAT, the final figure can become huge.
How Can They Benefit Both Landlords and Tenants?
Now you might be thinking, how can this benefit both the landlord and the tenant? Surely it only benefits the landlord? And if it’s only done after the lease has ended then that might well be true. But if you get a schedule of dilapidations done before the lease end, it can often help the tenant. If you’re a business tenant coming up to the final year or two of your lease and you don’t plan to stay.I It’s a good idea to ask your landlord to prepare a schedule of dilapidations now. Here’s a few reasons why:
• Leases often contain complicated wording that’s difficult to understand, and every word matters.. What might look OK to you repair-wise might look very different to a construction professional. So, you need clear definitions of what’s expected. Getting a schedule of dilapidations before the lease ends can draw together the relevant lease clauses and set out what work you need to do in order to comply with those clauses. It’s an unambiguous document, and shows you what your landlord will be looking for at lease end. With this knowledge, you can get accurate quotes for building work ourself and keep control of the costs. Rather than letting your landlord’s gold-plated contractors with high overheads complete the work with money from your wallet.
If you really don’t agree with the content of the schedule, obtaining this early can give you a chance to negotiate with your landlord before lease end, while they still have a vested interest in keeping you happy. While you don’t have to settle dilapidations claims before lease end, doing so can free up provision sums in your business and let you invest in other projects.
• Depending on your internal resources, you might want to manage the remedial works yourself, rather than the extra cost of a contract administrator. Do be careful though, as using a contract administrator can give you a good level of protection if things do go wrong. Plus, it can free up an enormous amount of time for other things. Like, you know, running your business!
Of course, you might decide to get your own dilapidations advice before you get the schedule. That’s fine, and we would always recommend that tenants take advice on dilapidations. But doing it after you’ve received the schedule can allow your surveyor to give you more bespoke, targeted advice, and save them from having to consider a whole lot of ‘what-ifs’. Which costs more money!
When Will I Get a Schedule of Dilapidations?
Normally, a schedule of dilapidations is served at lease end. But they can also be served partway through a lease. This step is typically only taken if a landlord is really concerned about the condition of the property, and it’s known as an interim schedule of dilapidations. These normally only contain items that, if not addressed now, will lead to bigger and more expensive work at lease end. As a business owner who isn’t a building specialist, you might not understand the implications of neglecting maintenance. In this instance, a landlord gains reassurance that their asset is being looked after, and a tenant enjoys the confidence of knowing they’re on top of things.. A stitch in time saves nine after all.
Are There Any Drawbacks?
Of course, while schedules of dilapidations can benefit landlords and tenants, there are also drawbacks. From the landlord’s perspective, if the surveyor massively overclaims, they could be disappointed by the outcome. Or worse, incur massively inflated costs paying their surveyor to argue about a massive claim that they were never realistically going to win.
Tenants often feel that the landlord is over claiming, which can reveal huge, unexpected looming costs. While it doesn’t mean that the costs weren’t already here (written into the contract), knowing about them can cause a fair few sleepless nights! Just like the landlord, a tenant’s surveyor fees can easily rack up while defending overblown or unfair claims. If a schedule is served early, you can sort these issues before the lease ends.
What Do I Do?
If you’re on the receiving end of a schedule of dilapidations. You’re legally expected to respond to your landlord within a reasonable time. This is usually within 56 days of receiving the schedule. We would always recommend speaking with a qualified and competent dilapidations surveyor before you respond, though. If you don’t, you could lose out. Either through creating arguments you have no hope of winning because you don’t understand the case law that underlies your lease, or by giving away too much to your landlord.
Whether you’re a landlord ensuring your building stays in good condition or a commercial tenant facing a dilapidations claim, we can help you take the next step. At Harrison Clarke we have a team of expert dilapidations surveyors who can support you through the whole process. Just get in touch with us on 023 8155 0051 to speak to one of our surveyors today.
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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