Quantified demand for dilapidations

Dilapidations are breaches of leases due to the condition of the property being leased. This may result from mistreatment of the property or poor or absent maintenance or repairs that are required by the lease. Further work may also be required at the end of a lease to reinstate alterations that have been made to the property by the tenant.

If the required works are not carried out, the landlord may issue a schedule of dilapidations, or a notice to reinstate. If dilapidations works are not carried out by the end of the lease, the landlord may claim damages from the tenant (a terminal dilapidations claim). This may take the form of a ‘quantified demand’ prepared by the landlord or their surveyor setting out details of the landlord’s losses as a result of the dilapidations.

The quantified demand might include:

• The cost of the repair works.
• The loss of value to the property.
• Holding costs.
• Loss of rent and service charge.
• Rates.
• Insurance.
• Security.
• Utilities.
• Cleaning.
• Finance costs.
• Fees.
• Consequential losses such as professional fees, legal fees, the cost of administration of the repair work and VAT. The legal basis for consequential losses should be set out.

However, the landlord cannot profit from this claim, so if for example they do not intent to reinstate the property (perhaps if the property is to be demolished or refurbished), this must be taken into account.

There may be a period of negotiation between the tenant and landlord in an attempt to agree a settlement figure. If the negotiation process fails then alternative dispute resolution or court proceedings may be necessary.

Valuation of the landlord’s losses can be complex, and so both parties may wish to appoint a surveyors to offer advice and prepare appropriate documentation. Further specialist advice may be necessary for complex components or aspects of the property, such as building services plant. Court proceedings may also involve expert witnesses.

A ‘Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy’ (the Dilapidations Protocol) is available from the Ministry of Justice. This describes the conduct the court expects the parties to follow before commencing proceedings, setting out a process and timetable for the exchange of information, and establishing standards for the content and quality of schedules of dilapidations and quantified demands.

The protocol suggests that the quantified demand should:

• Set out clearly all aspects of the dispute, and 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.
• Set out whether VAT applies.
• Specify a date (being a reasonable time) by which the tenant should respond. This will usually be within 56 days after sending the quantified demand.
• Where the monetary sum sought is based on the cost of works, it should be fully quantified and substantiated by either an invoice or a detailed estimate.
• 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 will generally be separate from the schedule of dilapidations but may be bound into the same document.

[edit] Related articles on Designing Buildings

• Alternative dispute resolution.
• Betterment.
• Break clauses in leases.
• Dilapidations.
• Dilapidations protocol.
• Lease Negotiations - Tenants Checklist.
• Licence for Alterations for Apartment.
• Rent-free period.
• Rent in administration.
• Rent review.
• Sample retail lease.
• Schedule of dilapidations.
• Scott schedule.
• Supersession.

[edit] External references

• RICS, A clear, impartial guide to Dilapidations For use in England and Wales. November 2013.
• Ministry of Justice, Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy.
• Ministry of Justice, Pre-Action Protocol for Housing Disrepair.