Few documents carry the weight of a Schedule of Dilapidations when dealing with property disputes, particularly those in the context of commercial properties.
This key document is often the focus of negotiations between commercial landlords and their tenants when a lease ends. Dilapidations refer to the damage or state of disrepair a property is left it at the end of a lease.
What is a schedule of dilapidations?
A schedule of dilapidations is a formal document that details all the issues that need to be rectified in line with the repairing obligations of the lease. It can be prepared by a building surveyor instructed by a landlord either some months before the lease ends, or after the tenant has moved out and the lease has ended.
What key things are included in a schedule of dilapidations?
- Property details
- Address and description of the property
- Relevant lease clauses in relation to repair, reinstatement and redecoration
- Identified breaches and disrepair
- List of specific items requiring repair or replacement
- Reference to relevant lease clauses for each item
- Details of what needs to be done to remedy any breaches
- Cost estimates
- Estimated or actual repair costs
If a schedule is being served before the tenant has moved out, then the costs of repair will be an estimate only. Once a tenant has moved out and if the property has been left in disrepair, a landlord’s building surveyor usually puts the repair contract out to tender to a number of contractors so actual prices can be updated.
Types of schedules of dilapidations
Interim schedule
This type of schedule would be served if the lease is still running and not close to ending. A building surveyor would prepare it and list items of disrepair. A landlord might serve it with a repairs notice, giving them 2 or 3 months to carry out the works. Failing which, the landlord may be entitled to go into the property, carry out the works, and recover the costs from the tenant as a debt.
Terminal schedule
This would be served if the lease was close to expiring or had already ended. It sets out, what items of disrepair are present, which leases clauses have been breached, what works need to be undertaken to remedy the disrepair and the likely costs.
Best practices for landlords
- A professional building surveyor should be instructed to prepare the schedule of dilapidations.
- The building surveyor should be familiar with repair, reinstatement and redecoration clauses in leases and their interpretation.
- If a landlord knows their tenant will be moving out, they should instruct a building surveyor well before the lease ends and serve that on the tenant so the outgoing tenant knows what items of disrepair and works they need to deal with before they move out. This gives the tenant the greatest chance of complying with the schedule and carrying out the works, and decreases the possibility of a dispute.
- If a landlord is serving a schedule of dilapidations after the lease has ended, they need to pay attention to the terminal dilapidations protocol, which recommends that a terminal schedule of dilapidations be served within 56 days of the lease ending.
It is also advisable for a building surveyor to inspect the property as soon as possible so they can gather evidence of the property's condition, as it was when the lease ended. Delays can lead to arguments being raised by the tenant about what has happened since they moved out.
Best practices for tenants
- If you are a tenant and are moving out of a commercial property, you should liaise with your landlord and make sure they are aware, and ask if they will be serving a schedule of dilapidations. If not, you should instruct your own building surveyor to review your lease and advise you on what works need to be done to return the property to the landlord in compliance with the lease obligations.
- A tenant’s building surveyor should try and liaise with the landlord or the landlord’s building surveyor, and agree what works the tenant will do before they give the property back. A landlord does not have any obligation to engage, but it is obviously in the landlord’s interest to get the property back in a repaired state, to facilitate a swift new letting.
- It is always cheaper for tenants to undertake their own repair works rather than face a financial claim from the landlord after the event.
