Dilapidations Process Key Stages

Understanding the Dilapidations Process Key Stages

Dilapidations should be viewed not as a last-minute concern but as a process that runs throughout the life of a lease.

For both landlords and tenants, recognising and proactively managing each stage of the dilapidations process is crucial for avoiding disputes, controlling costs, and protecting property value.

In this comprehensive guide, we take you through each dilapidations process key stages in the, expanding on how best to prepare at every milestone.

1. Lease Commencement and Schedule of Condition

At the very start of a tenancy, it is strongly advisable for both parties to document the condition of the premises in a Schedule of Condition.

This is typically a combination of photographs and detailed written descriptions, which, if attached to and expressly referenced in the lease, can significantly limit the tenant’s repairing obligations to the property's recorded initial state.

For example, where a commercial unit was already showing signs of wear and tear at the outset, the tenant might only be required to return it in no worse condition than recorded.

Without a Schedule of Condition, the tenant's obligations may include putting the property into a good and substantial condition regardless of its state at lease start, potentially making the tenant responsible for pre-existing defects.

Therefore, best practice dictates that particularly for older or already dilapidated properties, a jointly agreed and incorporated Schedule of Condition should be in place to fairly allocate responsibility.

2. During the Lease: Maintenance and Interim Schedules

Throughout the lease term, tenants are expected to carry out regular maintenance and timely repairs to the premises.

Landlords often retain the right to inspect the premises periodically, provided they give appropriate notice, to ensure that tenants are complying with their obligations.

Where significant disrepair is observed during the lease term, landlords may serve an Interim Schedule of Dilapidations.

Unlike terminal schedules served at lease end, interim schedules are issued mid-term to prompt the tenant to remedy breaches before they worsen.

It is important to understand that interim schedules generally cannot demand payment or damages — they serve to encourage remedial action rather than trigger financial liability, unless specific lease clauses, such as Jervis v Harris clauses, apply.

Landlords should exercise discretion when issuing interim schedules, focusing on material breaches rather than trivial issues, to preserve the landlord-tenant relationship.

Conversely, tenants should act promptly and responsibly upon receiving an interim schedule, addressing legitimate issues to prevent escalation of liabilities.

3. Preparing for Lease End: Tenant’s Exit Plan

In the final year or months of a lease, tenants must begin planning their exit strategy with great care. Although not a formal legal step, this preparation is critical. Tenants should thoroughly review their lease obligations, including repair, redecoration, reinstatement of alterations, and general cleaning duties.

A prudent tenant will often instruct a building surveyor to conduct a pre-lease-end dilapidations survey.

This survey can identify any breaches or necessary works, allowing tenants to address issues before vacating. This proactive approach can significantly reduce the risk and scale of a landlord's claim.

However, tenants must balance the costs and business disruption of carrying out repairs themselves against the potential financial settlement negotiations with the landlord after lease expiry.

Some tenants opt to continue business operations until the last day, returning the premises "as is" and negotiating damages afterward, accepting that they may lose some control over costs.

On the landlord's side, preparations also commence. They may arrange for a professional surveyor to inspect the property towards the end of the lease to prepare for the claim process.

4. End of Lease: Terminal Schedule of Dilapidations

Upon lease expiry or in the final weeks preceding it, landlords typically issue a Terminal Schedule of Dilapidations. This formal document, usually compiled by a chartered building surveyor, identifies every alleged breach of lease covenants related to the state and condition of the property.

A Terminal Schedule typically includes :

1. A list of each element of disrepair or breach (e.g., “Room 101 – walls have large holes and require making good and repainting”).

2. Reference to the lease clause breached (e.g., failure to decorate as required by clause X, or not repairing as per clause Y).

3. The remedial works necessary to rectify the breach (e.g., “fill and plaster holes, repaint entire wall with two coats of emulsion to match original color”).

4. An estimate of the cost for those works (often by the surveyor or a quantity surveyor/contractor).

This schedule is effectively the backbone of the claim. Under the Dilapidations Protocol, it should be served in a timely manner – generally within 56 days after lease end (though if a landlord is very prepared, it might even be served the day after lease end).

Sometimes a landlord may even serve a “draft” schedule shortly before lease end to open negotiations, but formally it’s usually post-lease when the claim crystallizes. The schedule may also specify other resultant losses. This could be loss of rent for instance (if the property can’t be re-let during repairs) or service charge and business rates the landlord incurs while the property is empty.

It’s common for Terminal Schedules to be served toward the end of the term or immediately after expiry, especially for longer leases (landlords of short-term tenancies might skip a formal schedule and just negotiate).

According to RICS guidance and the Protocol, any Terminal Schedule served before lease end should be updated or confirmed after lease end to capture the actual end-state.

5. Quantified Demand: Formalising the Landlord’s Claim

Accompanying the Terminal Schedule, landlords are required to issue a Quantified Demand. This crucial document provides a clear financial statement of the claim, itemising the estimated costs for repairs, professional fees, and any additional losses.

The landlord must properly evidence these claims and, where appropriate, commission a Section 18 valuation to demonstrate that the total claim does not exceed the reduction in the property's market value caused by the disrepair.

Failure to do so can severely weaken their case if the matter proceeds to court, particularly where the tenant mounts a diminution in value defence.

6. Tenant’s Response and Use of a Scott Schedule

Upon receiving the Terminal Schedule and Quantified Demand, tenants typically engage their own building surveyor to prepare a formal response. This is usually presented in a Scott Schedule — a side-by-side table that lists each landlord’s claim, followed by the tenant’s admissions, denials, counterarguments, and alternative cost estimates.

Through the Scott Schedule, tenants may admit certain breaches, dispute others on factual or legal grounds, contest the necessity or extent of proposed works, or argue that the landlord’s cost estimates are excessive. They may also challenge items that appear to involve "betterment" — where the landlord seeks to upgrade rather than merely repair the premises.

If tenants intend to rely on a Section 18 diminution in value defence, they should indicate this in their response and provide a supporting valuation where possible.

7. Negotiation and Settlement

Following the exchange of schedules, a negotiation phase typically ensues between the parties’ respective surveyors. These negotiations are usually conducted on a "without prejudice" basis, meaning that offers and concessions made cannot later be used against either party in court.

During negotiations, both sides may undertake a joint inspection of the premises to better understand the disputed items. As evidence is exchanged, it is common for some items to be conceded, narrowed, or re-costed to reflect a more accurate assessment.

Negotiations also often touch on broader strategic considerations, including whether the landlord genuinely intends to carry out the remedial works or whether the tenant’s proposed alternatives are acceptable. Disputes over costs can be mediated by reference to actual contractor quotations or expert reports.

Where negotiations reach a deadlock, the parties are encouraged under the Protocol to consider Alternative Dispute Resolution (ADR), such as mediation or expert determination, to avoid the expense of court proceedings.

In the majority of cases, a financial settlement is reached. This will be recorded in a settlement agreement or solicitors’ correspondence, bringing the matter to a close without litigation.

8. Litigation: When Negotiations Fail

If settlement negotiations fail, landlords may issue court proceedings to recover their claimed damages. However, they must demonstrate compliance with the Dilapidations Protocol, as non-compliance can result in cost penalties even if they succeed at trial.

In court, the key issues will revolve around proving the existence and extent of breaches, the reasonableness of the remedial works or losses claimed, and whether the claim exceeds the statutory cap imposed by Section 18.

The court will assess the evidence presented, including expert witness testimony from building surveyors and valuers. Ultimately, the judge will award damages based on either the lower of the cost of repairs or the diminution in value.

Given the high costs and uncertainties associated with litigation, it is relatively rare for dilapidations disputes to reach trial. Settlements can and often do occur even after court proceedings have commenced.

Checklist: Dilapidations Process Key Stages Timeline

To summarise, the dilapidations process key stages typically follows this structured timeline :

At lease commencement: Agree and attach a Schedule of Condition. Understand repair, redecoration, and reinstatement obligations.

During the lease: Maintain the property, conduct regular inspections, and address serious issues via interim schedules where necessary.

Approaching lease end: Both parties should prepare thoroughly. Tenants commission exit surveys and landlords conduct preliminary inspections.

At lease expiry: The tenant yields up the property; the landlord inspects and serves a Terminal Schedule with a Quantified Demand.

Post lease: Tenant responds within 56 days. Negotiations commence.

Settlement or litigation: Aim for an amicable settlement wherever possible. Proceed to litigation only as a last resort.

Conclusion: Mastering the Dilapidations Process Key Stages

Understanding and proactively managing the dilapidations process key stages is essential for both landlords and tenants seeking to protect their positions and avoid unnecessary disputes.

Early preparation, open communication, and professional advice at every stage are the keys to navigating this complex area effectively.

If you need assistance in managing your dilapidations strategy — whether as a landlord or tenant — our expert team is ready to support you.

Contact us today to ensure you are fully prepared and properly advised throughout the process.

Dilapidations Process Key Stages - Related Resources:

New Lease Schedule of Condition

Understanding Section 18 Valuations

Understanding Diminution in Value

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