25 July 2012
In tough times, dilapidations claims become more important to both landlords and tenants. Indeed it is a “booming business” and the RICS have estimated that the value of dilaps claims in England and Wales is around £3.36 billion per annum. This guide provides an introductory overview of the subject.
What is a “terminal dilaps” claim?
A terminal dilapidations claim (colloquially known as a ‘terminal dilaps’ claim) is a landlord’s claim against a tenant for failing to return the premises at the end of a lease in the condition required by the lease. As the claim arises after the lease has ended, it is always for damages.
Guidance for landlords and tenants before signing a lease
Dilaps claims can be very substantial and both landlord and tenant should consider the issue carefully before the lease is completed. The parties’ respective rights and obligations as regards to dilapidations are an issue for negotiation like any other and the parties’ ultimate positions will be affected by considerations such as the type of property, the identity of the landlord and tenant, how the premises are fitted out, the length of the lease and market conditions.
Typically landlords will look to pass as much liability to a tenant as possible. However, landlords should still consider carefully what type of obligation is appropriate e.g. internal and external versus internal-only obligations and how alterations should be dealt with.
A well-advised tenant should:
- Have the premises surveyed to identify any potential problems and the possible extent of any dilapidations liability;
- Limit their liability if possible e.g. by reference to a schedule of condition and
- Consider making accounting provision to amortise the likely liability over the life of the lease – see Financial Reporting Standard 12.
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