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Legal & Reg
Dilapidations (Legislation (Landlord and tenant…
Legal & Reg
Dilapidations
Legislation
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Civil Procedure Rules 1998 (CPR) #
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Claim
Allegation of a breach of contract, actionable in a court of law. #
Dilapidations can occur through:
• claims during the term
• claims at the end of the term
• break clause situations.
Break clause/ determination
A covenant in a lease that enables a tenant or landlord, conditionally or not, to determine the lease.
Reasons for issuing a dilaps claim include:
- To get repairs carried out
- To obtain possession of a building
- To obtain compensation for works LL will have to do. #
Breach of lease covenants that relate to the condition of a property during the term of the tenancy or when the lease ends.
If a landlord waits until the end of the term before taking action, it will have no choice but to pursue a claim for damages. Therefore, landlords are best advised to plan ahead so that the other remedies remain open to them, particularly if the landlord would prefer the tenant to carry out the work required.
Breaches should be separated into relevant categories
- repair,
- reinstatement,
- redecoration
- yield up
- statutory
If a photographic SOC was carried out prior to the lease being signed or included within the lease this can be used to document the changes.
Claims based on the law of contract, supplemented by case law and statute.
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Schedule
Schedule of Dilapidations identifies:
• Relevant lease/tenancy obligations
• Alleged breaches of those obligations
• Remedial works that have been completed or are proposed in order to rectify each alleged breach.
• The estimated or actual cost incurred in rectifying those breaches. (terminal)
Landlords’ Schedules of Dilapidations are commonly referred to in the following manner:
• Interim Schedule of Dilapidations: a Schedule of Dilapidations served during the term, prepared in contemplation of remedy of any alleged breaches during the contractual term of the lease, and not relating to yield-up obligations.
• Terminal Schedule of Dilapidations: a Schedule of Dilapidations prepared at or shortly after the end of the lease term. This phrase is also commonly used in relation to a Schedule of Dilapidations prepared in anticipation of the end of the lease term, which includes reference to yield-up
Protocol does not apply to interim schedules? the CPR Practice Direction - Pre-action Conduct is likely to apply to such claims???
While your entitlement to start a court claim will not become legally time-barred for six or 12 years after expiry if the lease is under seal, or six years after expiry if the lease is under hand, the Dilapidations Protocol expects that you will issue a Schedule of Dilapidations and a Quantified Demand within 56 days after the end of the lease term. However, the lease may contain a clause that sets out a specific timetable so you need to check it carefully. If you have sent a Schedule of Dilapidations to the tenant before the end of the lease term you are expected to update it at the end of the lease term.
Scott Schedule: a Schedule of Dilapidations with additional columns to enable the parties to set out their respective views.
The document is usually prepared by a building surveyor.
Quantified Demand: a document prepared for the purpose of and complying with part 4 of the Protocol, typically incorporating a Terminal Schedule of Dilapidations. The document is usually prepared by a building surveyor. #
If the Quantified Demand includes any other losses, they must be set out in detail, substantiated and fully quantified. The landlord should explain the legal basis for the recovery of losses, e.g. whether they are sought as part of the damages claim or under some express or implied provision of the lease.
The Quantified Demand should not include items of work that are likely to be superseded by the landlord's intentions for the property.
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set out and substantiate the monetary sum sought as damages in respect of the breaches detailed in the schedule as well as any other items of loss for which damages are sought. It should also set out whether VAT applies
what basis the cost of the claim is made - Tendering, BCIS, spons, figure out of the air?
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Quantification of Loss
Prior to issuing proceedings, the landlord should quantify its loss by providing to the tenant a detailed breakdown of the issues and consequential losses based on either a formal diminution valuation or an account of the actual expenditure or, where it has carried out some but not all remedial action, a combination of both; unless, in all the circumstances, it would be unreasonable to do so. #
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Diminution in value
Value of the premises in good condition vs the value in a poor condition
Taking into account potential uses and developments.
Lease type:
- FRI - to put and keep the property in a good state of repair and decoration
- Internal repairing obligation only
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Endorsing a schedule
The Schedule should contain an endorsement that in the landlord’s or the landlord’s surveyor’s opinion:
- all the works set out in the schedule are reasonably required to remedy breaches complained of.
- a full account has been taken of the landlord’s intentions for the property, as advised by the landlord.
- the costings, if any, are reasonable.
- Regard has been had to the principles laid down in the RICS Guidance Note on Dilapidations.
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