Handle dilapidations at the end of a lease

When you move out of business premises, you may have to pay for repairs or return the property to the state it was in when you took it on. These repairs are called dilapidations, and what you owe depends on the repair, decoration and reinstatement terms in your lease.

Limits on what your landlord can claim

Damages for breaking a repair covenant can never be more than the amount by which the breach reduces the value of the landlord's interest in the property. Your landlord also cannot recover anything for repairs at the end of the lease if the premises will be pulled down, or altered so much that the repairs would be worthless, at or shortly after the end of the tenancy.

The Dilapidations Protocol

The Dilapidations Protocol covers claims about commercial property in England and Wales at the end of a tenancy. It sets out what both sides should do before anyone goes to court.

• Your landlord should send a schedule of the breaches within a reasonable time, generally within 56 days after the tenancy ends.
• With it, or soon after, your landlord should send a quantified demand setting out the sum claimed and whether VAT applies.
• You should respond within a reasonable time, usually within 56 days after the quantified demand, saying which items you accept and which you dispute.
• You and your landlord, or your surveyors, should generally meet within 28 days after your response to try to agree the disputed items.
• If you rely on the limit on damages, you must say so and send your landlord a valuation, generally within 56 days after their breakdown of losses.

Both of you should consider mediation or another way of settling the dispute, although no one can be forced to use one. The court takes into account how far each side followed the protocol when it decides who pays costs.

Reduce what you owe

Keep records of repairs and maintenance throughout the lease. If your landlord serves a schedule of dilapidations during the lease, deal with it while you are still in occupation.

Well before the lease ends, read the repair, decoration and reinstatement terms and get your own surveyor's assessment. Decide whether to carry out the works yourself before you leave or to settle the claim in money. Ask whether your landlord plans to demolish or substantially alter the premises, as that can reduce or remove the claim.