News and Blogs

22 March 2023
Schedule of Dilapidation What can a commercial landlord do when a tenant vacates and has failed to maintain a property

By Simon Preston, Director.

When a tenant vacates for whatever reason, Landlords can be left with a property in a poor state of repair, undecorated and with unexpected items left in situ or unapproved alterations.

It is a situation most commonly faced by ‘at arms-length’ or ‘absent’ owners, who lease out their properties but place too little focus on their ongoing maintenance and upkeep, only discovering the problems too late.

This can leave them facing an extended void period with no income whilst the necessary repairs need to be made.

It is a situation which landlords can avoid by employing specialists in commercial property management, who will maintain regular communication and visit the property periodically to try and ensure lease repairing obligations are complied with.

However, should you as a landlord be faced with a property left in need of significant repair, there is a process you can follow to remedy this situation.  With lease provisions permitting a landlord can serve a Schedule of Dilapidation order against their former tenant for damages.

This is something we have often arranged for landlords at Garness Jones when they have come to us looking to get their properties back in good condition.

What is a Schedule of Dilapidation?

Essentially, a Schedule of Dilapidation is a document issued on behalf of the landlord, to the tenant, setting out how the property has not been maintained, importantly, to conditions set out in the terms of the lease.
This could be from basic wear and tear to major structural damage. It protects the interests of the property owner to ensure they don’t suffer loss, or incur costs, due to the actions of their tenant.

What is included in a Schedule of Dilapidation?

The report should outline how agreements of the lease have been breached with regards to the maintenance and upkeep of the property, and make it clear which items the tenant is responsible for repairing or bringing back to standard.
The schedule should detail all items at a property which have not been maintained to the condition stipulated in the lease agreement, as a result of the tenant’s failure to repair, decorate or reinstate aspects of the property. It should also clearly state the repairs which must be carried out to return the property to the condition it was at the beginning of the lease.

What if the tenant denies responsibility?

This could be a problem if there is little evidence to the condition of the property when it was leased to the tenant. To counter this, we always advice landlords to attach a Schedule of Condition to any new property lease.
This is a report which documents the condition of the property with photographs and is attached to the start of the tenancy. These reports are signed and agreed by both parties and are vital documents to reference should there be any disagreement at the end of the tenancy.

How is the cost of the work required on the property calculated?

A landlord will need to instruct a chartered surveyor to assess the terms of the lease and any related documents such as the Schedule of Condition report, and identify where there have been breaches with regards to the upkeep and maintenance of the property.
They will then prepare the Schedule of Dilapidations and a ‘quantified demand’, which sets out details of the landlord’s losses as a result of the dilapidations.
This can include the cost of repairs, such as loss of property value, loss or rent and service charge.

What happens if the tenant disputes the value set out in the schedule?

It is best to expect there to be some form of negotiation, and again, this is why it is essential to appoint specialist surveyors who are highly experienced in handling such situations and who will prepare appropriate documentation.
At Garness Jones, our experienced team have a track-record of successfully negotiating on behalf of landlords in such scenarios, thereby avoiding the costly process of entering dispute resolution or court proceedings.

How we issued a Schedule of Dilapidation order to help a landlord attract national retailer tenant

Our team issued a Schedule of Dilapidation on behalf of a landlord which was used to fund investment back into the property, returning it back to a standard suitable to meet the needs of national retailer JTF.
The 18,840 sq ft premises had previously been home to national car and bike specialist Halfords for many years before it moved to a new site.
Having been impressed by the potential of the site, JTF agreed to taking on the property as, due to the schedule of dilapidation order being issued and agreed, they knew the funding would be provided to redevelop the site ready for a new store.

Summary

No landlord wants to be in the position where they need to issue a Schedule of Dilapidation on a tenant, and it is something which can be avoided with proactive commercial property management and clearly defined lease agreements.

It is an increasing practice to have an agreed maintenance programme at the start of a new lease, as this can ensure a property is maintained to market standard throughout a tenancy. It’s also better to work with tenants throughout a lease, and perhaps issue interim schedules to prevent more significant problems developing.

However, should a landlord be in the situation where a property has been neglected and left in a state of disrepair by a tenant, Schedule of Dilapidation orders are a powerful means recovering the money required to put properties back to the condition expected, which was of course the tenant’s duty all along.