Interim or Terminal? Dilapidations During and at the End of a Lease

by | May 16, 2011 | Dilapidations

Most landlords and tenants think of dilapidations as something that happens when a lease ends. But disrepair does not wait for the lease to expire, and a landlord watching a building decline may want to act sooner. The law treats claims during the term, known as interim claims, quite differently from claims at the end, known as terminal claims.

Terminal dilapidations

When a lease ends, the landlord serves a schedule of dilapidations setting out breaches of the repairing, reinstatement and redecoration covenants. The claim is for damages. Under section 18 of the Landlord and Tenant Act 1927, damages for disrepair cannot exceed the reduction in the value of the landlord’s interest. If the landlord plans to demolish or substantially alter the building, the claim for disrepair may be lost altogether.

Interim dilapidations

During the term, a landlord has three main routes.

  1. Damages. For many longer leases, the Leasehold Property (Repairs) Act 1938 applies. The tenant can serve a counter notice, and the landlord then needs the court’s permission to proceed.
  2. Forfeiture. Ending the lease for breach is a serious step, with notice requirements and the tenant’s right to seek relief.
  3. Self help. Many leases allow the landlord to enter, carry out the repairs and recover the cost as a debt. Used carefully, this is often the most practical remedy. The notice, the scope and the costs all need to be right.

Advice for landlords

  • Inspect regularly, not only at the end of the lease.
  • Tackle items that cause further damage, such as roof leaks or blocked gutters, before they spread.
  • Keep the schedule tied closely to the wording of the lease.

Advice for tenants

  • Read your repairing covenant and any schedule of condition before the lease starts.
  • Deal with interim notices promptly, and take advice before ignoring one.
  • Plan for terminal liability well before the end date, when you still have time and choice over how work is done.

Whichever side you are on, early, proportionate advice usually costs far less than a contested claim. Our Dilapidations service acts for landlords and tenants. See how we took a proportionate approach for a portfolio landlord.