Dilapidations — preparing the schedule the surveyor will actually read.

The Schedule of Dilapidations is, in our experience, the document most likely to be over-engineered by the landlord's surveyor and under-respected by the tenant's. It is also the document most directly responsible for whether an end-of-lease matter settles in three months or eighteen.

This note is addressed to both sides — the landlord preparing a terminal schedule, and the tenant receiving one. The two perspectives are mirror images of each other, but the principles overlap.

The schedule that settles

The schedule that settles is the one written to be read. That sounds obvious, but most schedules are not. They run to ninety pages where forty would do. They cite the lease clause once and the same clause again. They reach for emotive language where photographs and costs would carry the argument. They list every item the surveyor noticed, rather than every item the lease actually requires.

The settling schedule has five characteristics: it is short on adjectives and long on photographs; it costs items at fair trade rates rather than retail; it allows for tenant remediation as an alternative to landlord works; it cites the specific lease clause for each item; and it avoids emotive or speculative language entirely.

Five principles for preparation

Photograph every item. A schedule with a photograph beside each item is a schedule that holds up at mediation, settles at negotiation, and rarely sees a court. The cost of the additional photography is paid back many times in time saved.
Cost at fair trade rates, not retail. The damages recoverable are those the landlord would reasonably spend; not those of a premium contractor with a margin reflecting branding. Cost specifications need to reflect a competent local contractor, not the most expensive option.
Allow for tenant remediation. The schedule that lists works as either-or — works the tenant may execute, or works the landlord will charge for — is the schedule that gives both sides an honest path to settlement. The schedule that proceeds straight to a damages claim has skipped a step the lease usually provides.
Cite the lease clause for each item. Every item should be tied to a specific lease covenant — repair, decoration, reinstatement, statutory compliance, yielding-up. Items without a clause citation are items without a basis.
Avoid emotive and speculative language. "Significant damage", "extensive disrepair", "egregious breach" — language that reads as advocacy is language that invites response in kind. Plain descriptive language settles. Adjectives litigate.

The cap on damages

Section 18(1) of the Landlord and Tenant Act 1927 caps damages for breach of repairing covenants at the diminution in the reversionary value of the premises. The cap is more honoured than understood. In practice, it has three implications that every terminal schedule should address:

The schedule should be supplemented with — or, at minimum, anticipate — a separate section 18(1) valuation. The diminution in value, not the cost of works, is the maximum recoverable. Where the works would not increase the reversion (because the landlord intends to refurbish or redevelop) the cap may be very low or nil.

Tenants should request and review the landlord's redevelopment intentions early. Where there is any intention to refurbish, redevelop, or change use within a defensible period, the section 18(1) argument may extinguish significant heads of claim.

Both sides should retain a valuer alongside the surveyor where the matter is non-trivial. The dilapidations surveyor establishes the works; the valuer establishes the cap. The two together establish the negotiating range.

The dilapidations matter that runs to litigation is almost always the matter in which the cap was raised too late.

The negotiating position that works

For the landlord's surveyor: open with a fair schedule, not a maximalist one. The schedule that is intentionally inflated to provide negotiating room is the schedule that produces eighteen months of correspondence and a settlement at fifty per cent of the opening figure — when a fair opening would have settled at eighty-five per cent of itself in three months.

For the tenant's surveyor: respond promptly, in writing, with priced counter-comments item by item. The response that is delayed is the response that escalates. The response that engages on the substance reduces the matter to its actual disputes.

For both: meet on site. The site visit, with both surveyors present and a willingness to agree what can be agreed, settles more dilapidations matters than any volume of written correspondence. The hour spent on site is paid back many times over.

The target, for any non-trivial terminal dilapidations matter, should be settlement within ninety days of service. Most matters that take longer than that have, somewhere in their history, departed from one of the five principles above.

The relationship that follows

Dilapidations is, on its face, an adversarial process. A surveyor on each side, a position to advance, a financial dispute to resolve. It can also be a professional exercise conducted with courtesy on both sides — and the courtesy, where it survives, almost always produces the better commercial result.

The landlords and tenants who handle dilapidations well are, almost without exception, the same parties who handle the rest of the lease well. The relationship outlives the matter; the matter is settled in the shadow of that relationship.