Dilapidations | Tenant Beware!

Dilapidations can be a thorny issue for both landlords and tenants. Basically they are repairs for which a tenant is liable either during or at the end of a lease.  Much will depend on the wording of the lease itself as to the extent that the tenant may be liable.

The recent case of Peachside Limited v Koon Yau Lee neatly summarises the defences available to a tenant in a claim for dilapidations by the Landlord on the determination of a Lease.  The tenant can rely on two statutory caps set out in Section 18 of the Landlord & Tenant Act 1927.

The first provides that damages must not exceed the amount by which the value of the Landlord’s reversion is diminished by reason of the breach of the Tenant’s repairing covenants.   This is an objective assessment achieved by taking a hypothetical valuation of the value of the reversion on the expiry date without the benefit of hindsight, on two bases;   one on the basis of the premises as it would have been in compliance with the covenants in the Lease, and the other on the basis that the premises in its actual condition.  The task for the Court is to find the difference between the value of the premises in disrepair on the open market and the value of the premises had there been no breach of covenant to repair.

The second is that no damages are recoverable where the premises are to be pulled down or structural alterations are to be carried out shortly after the end of the term.  This limb is a subjective one, where the relevant intention is that of the claimant, not the hypothetical purchaser.  In order to make out that limb in the present case, the defendants needed to demonstrate that as at the expiry of the term the premises were going to have such structural alterations as would render valueless the repairs covered by the covenant shortly after the term expiry date.

A claim for dilapidations is always contentious.  Expert advice should be sought especially where the sums involved are considerable.  In this case the Court made an award against the defendants in the sum of £542,671.  Tenants beware!

We can help limit your liability in the drafting of the lease and we can advise on your position and help if the landlord is claiming for dilapidations against you at the end of the lease. Just call us on 01926 491181 or email: CHoughton@moore-tibbits.co.uk.