Most commercial landlords and tenants face dilapidations issues. Here, we take a look at what dilapidations are, and the remedies available to landlords.
First things first, what are dilapidations?
Dilapidations refers to disrepair covered by repairing covenants in a lease. It usually covers breaches of the tenant’s covenants relating to the condition of the property.
All leases contain different repairing covenants for the tenant. The clauses that are generally relevant to the tenant’s liability for dilapidations include the:
- repairing covenant;
- decorating covenant;
- covenant to comply with statute;
- clauses that set out the state in which the tenant must leave the property at the end of the lease term; and
- requirements relating to reinstating the property after the tenant has carried out alterations.
We have looked in a previous article at practical considerations for landlords. But what happens if a dilapidations issue arises? What remedies are available to a landlord whose tenant has breached one of the repairing covenants? There are a few options available, and the most appropriate will depend on factors such as:
- the type of disrepair
- the relationship between the parties. If the relationship has disintegrated, for example, a landlord is more likely to consider forfeiture.
- Whether the lease has expired or is still within the term.
Many commercial leases entitle the landlord to enter the property during the term of the lease, carry out any repairs, and then recover the cost of doing so from the tenant. If the lease does not contain such a term, if the landlord enters the property, it may constitute a trespass.
The benefit for the landlord of carrying out the works themselves is that they can control the quality of the work. He will then have a debt claim against the tenant.
Almost all commercial leases include a forfeiture clause. This entitles the landlord to forfeit the lease for a breach of covenant, including a covenant to repair.
To forfeit a lease, a landlord must serve the tenant with a s146 notice, which sets out the breach complained of; requires that the tenant remedies the breach; and requires the tenant to pay compensation for the breach.
3. Specific performance
In some cases, it may be appropriate to ask the court for an order to compel the tenant to carry out the repairs. However, there will usually be a more suitable method of sorting the dispute.
A landlord is entitled to claim damages if the tenant fails to comply with its repairing obligations. In fact, a claim for damages is the only remedy if the lease has come to an end.
a. Claim for damages brought during the term of the lease
In this case, the starting point is the reduction in value of the property, not the cost of the repairs. The reason for this is that while the tenant is in the property, the landlord can’t spend the damages on repairs in any case.
b. Claim for damages brought after expiry of the term
Once the tenant has vacated the property, the measure of damages is the reasonable cost of carrying out the works, plus the loss of rent until the works have been completed (where required). There are limits to the amount of damages that a landlord can claim.
Our property disputes solicitors can assist you with any dilapidations issues. In recent months, they have helped landlords recover £100,000s in damages. Call us on 0800 988 7756 for a FREE initial chat.