Dilapidations: the basics

What are dilapidations

Dilapidations are damages awarded to a landlord where a tenant has failed to comply with its obligations to keep premises in the state of repair required by the covenants (a term used to connote a solemn agreement) in the lease.  This issue commonly crops at the end of a lease, when the property reverts back to the landlord who is then faced - or claims to be faced - with the costs of carrying out the outstanding repairs. 

Usually, the case law in this area deals with disputes over the costs of repairs already carried out by landlords and therefore in this post references to costs of repairs can mean either those that will be or already have been incurred. 

The measure of damages

The amount of damages due to the landlord is calculated as the reasonable cost of repairs the tenant should have carried out, plus lost rents for the period needed to carry out those works. 

Damages are however subject to a cap imposed by section 18 of the Landlord and Tenant Act 1927. The cap is calculated as the difference between the value of the property had the works been carried out, and the value of the property in its actual state. Usually the difference in the two values will be equivalent to the costs of the repairs but this is not always the case.

Assessing damages

When it comes to assessing both damages and the cap it is important to remember that the tenant’s obligation is to put and keep the premises in a state of repair that has regard to the age, character and locality of the premises, such that any repairs would make them reasonably fit for an appropriate type of tenant at a fair market rent. An appropriate type of tenant being a tenant of the class likely to lease the premises.

The tenant is entitled to perform the repairing covenants in the manner which is least onerous to him.

If the landlord has to carry out additional work, beyond that required of the tenant, those costs cannot be recovered from the tenant. Furthermore, if those additional works would have rendered some or all of the works required of the tenant worthless, then damages for the tenant’s failure to carry out those required works are not recoverable; a doctrine known as “supersession”. 

Under section 18, damages cannot be claimed if following termination of the tenancy the property have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.

In assessing the reasonableness of the remedial works the appropriate test is whether the landlord’s repairs have gone no further than was necessary to make good the tenant’s breaches. 

The standard by which the repairs are to be judged is by reference to the condition of the premises at the time the lease was granted and not what one would expect of equivalent premises at the date of the expiry of the lease.

Where there is a covenant that the tenant will not make alterations to the premises without the landlord’s consent, there is no obligation on the tenant to make repairs that would involve such an alteration. 

Where there is an obligation to keep plant, fixtures, machinery and the like in good repair, replacements can be made on a like for like basis. The tenant is not required to upgrade it in order to bring it up to date, unless regulations require so.

The landlord is under a duty to mitigate his losses and avoid them where possible. Furthermore, any remedial work must be proportionate to the benefit obtained. However, the fact that the landlord has carried out more extensive work than was required does not, by itself, act as a bar to recovery.  

Conclusion

Dilapidations are - like other forms of damages - intended to put the landlord in the position he would have been in but for the tenant’s breach. It is not an opportunity for the landlord to profit from his tenant’s breach of covenant. It is crucially important that tenants consider the scope of their obligations before entering into a lease and at the same time keep accurate records as to the state of the premises at the time the lease is entered into. That said, once a tenant has covenanted to keep a premises in good repair any pre-existing defects will - effectively - be adopted by the tenant.