How do Dilapidations work?

Dilapidations refer to the repairs and maintenance that a tenant is responsible for at the end of a lease. This includes repairing any damage caused during the tenancy and restoring the property to its original condition at the start of the lease.

Tenants should review their lease agreement and familiarise themselves with their obligations regarding dilapidations. It is also important to document the property's condition at the start and end of the lease with a Schedule of Condition.

A Schedule of Condition is a document that records the condition of a property at a specific point in time. It is often used in commercial property leases to provide a benchmark for the property's condition at the start of a tenancy. The Schedule of Condition typically includes a detailed written description of the property and any defects, as well as photographic evidence.

The purpose of a Schedule of Condition is to protect both the landlord and the tenant by providing a clear record of the property's condition at the beginning of the lease. If the tenant is required to return the property in the same condition as it was at the start of the lease, the Schedule of Condition provides a benchmark against which the property's condition can be assessed.

At the end of the lease, the Schedule of Condition can be used to determine whether the tenant has met their obligations regarding the condition of the property. If there are any disputes regarding the property's condition, the Schedule of Condition can be used as evidence in arbitration or legal proceedings.

There are several ways to reduce your dilapidations exposure as a tenant:

1. Maintain the property throughout the tenancy: One of the best ways to avoid a large dilapidations bill at the end of your tenancy is to keep the property in good condition throughout your occupancy. This means addressing any repairs or maintenance issues as soon as they arise, and keeping the property clean and tidy.


2. Review your lease agreement: Your lease agreement will set out your obligations regarding the condition of the property at the end of your tenancy. Make sure you understand these obligations and seek professional advice if necessary.


3. Get professional advice: Working with a dilapidations specialist can help you to understand your obligations and avoid unnecessary costs. They can also advise you on the best way to approach the work required, whether that's completing it yourself or negotiating a financial settlement with your landlord.


4. Complete the work yourself: If you're comfortable taking on the required work, completing it yourself can greatly reduce your financial exposure. Make sure you understand what is required, and seek professional advice if necessary.


By taking these steps, you can greatly reduce your dilapidations exposure and avoid unnecessary costs.

Exiting tenants are often surprised by their dilapidations liability at the end of a tenancy for several reasons:

1. Lack of understanding of lease obligations: Many tenants may not fully understand their obligations under their lease agreement, particularly with regards to dilapidations. They may assume that the landlord is responsible for maintaining and repairing the property, and are therefore surprised to learn that they are liable for the cost of returning the property to the required condition.


2. Failure to maintain the property: Tenants may also be surprised by the cost of dilapidations if they have not maintained the property properly during their tenancy. If the property is returned in a poor condition, the cost of repairing and restoring it can be substantial.


3. Misunderstanding of the property's condition: Tenants may also be surprised by their dilapidations liability if they believe that the property is in a better condition than it actually is. They may assume that they are only responsible for minor repairs or cosmetic improvements, when in fact there are more substantial issues that need to be addressed.


4. Inadequate communication: In some cases, landlords may not communicate clearly with tenants regarding their obligations and the potential cost of dilapidations. This can lead to misunderstandings and confusion, and tenants may be surprised when they receive a large dilapidations bill.


To avoid these surprises, tenants should make sure that they fully understand their lease obligations, maintain the property properly during their tenancy, and communicate clearly with their landlord throughout the lease term. Working with a dilapidations specialist can also help to ensure that tenants are aware of their obligations and can plan for any potential costs.

Tenants can minimise their dilapidations liability by maintaining the property properly during their tenancy, completing any necessary repairs promptly, and seeking professional advice regarding the required works at the end of the lease.

A license to alter is a legal document that allows a tenant to carry out alterations or improvements to a commercial property during their lease term. This document is usually issued by the landlord and sets out the terms and conditions for the proposed works.

In most commercial leases, the tenant is required to obtain a license to alter from the landlord before making any changes to the property. This is to ensure that the landlord is aware of the proposed works and can ensure that they do not negatively affect the property's value or condition.

The license to alter will typically include the following information:

1. Scope of the works: The license will specify the exact nature of the works to be carried out, including any building materials or methods that are to be used.


2. Timelines: The license will set out the time period in which the works are to be completed.


3. Responsibility for costs: The license will typically state who is responsible for the cost of the works, including any ongoing maintenance or repairs.


4. Insurance: The license will outline the insurance requirements for the works and who is responsible for any related claims.


5. Restoration: The license will set out the tenant's obligation to restore the property to its original condition once the lease has ended.


Overall, a license to alter provides a formal framework for tenants to make changes to a commercial property during their lease term. It helps to ensure that the works are carried out in a responsible and safe manner and that the property's value and condition are protected.

Yes, tenants can negotiate the dilapidations settlement with their landlord. This can involve agreeing on the works required and the cost of those works.


Yes, completing the works yourself can hugely reduce the cost of dilapidations. However, it is important to ensure that the works are carried out to a professional standard and that the landlord is satisfied with the quality of the work.

Yes, tenants can use their dilapidations liability as a bargaining tool to negotiate a rent reduction or lease extension. This can be particularly effective if the tenant is willing to carry out the required works themselves.

The process involves inspection, serving a schedule, negotiations or completing the work, and potentially settling or litigating. Early advice helps manage cost and risk effectively.

A Dilapidations Schedule (SoD) outlines breaches of lease relating to the condition of a commercial property. It’s typically served by a landlord towards the end of a lease.

Ideally, the landlord serves the schedule in the last six months of the lease — or shortly after the lease ends. Ideally you want the Schedule of Dilapidations eight weeks before lease ends. If your landlord is resistant to providing one you can commission your own.

Get in touch and we can put you in touch with one of our trusted surveyor partners. We can use this as a job spec for work that requires completing.

A dilapidations claim is a landlord’s formal request for compensation due to a tenant’s failure to meet lease repair or reinstatement obligations in the lease and Licenses to Alter.

The dilapidations protocol is a pre-action protocol that outlines the process for resolving disputes between landlords and tenants regarding the condition of a commercial property at the end of a lease. It is basically a playbook for how landlords and tenants should deal with end-of-lease repair claims. It’s not law, but the courts expect everyone to follow it as it encourages fair dealing, clear communication, and trying to settle things sensibly before heading to court. Think of it as a guide to avoid unnecessary drama and legal costs.

“The Dilapidations Protocol is a pre-action protocol that outlines the process for commercial landlords and tenants to resolve disputes about property damage or disrepair at the end of a lease. It sets a framework for information exchange, standards for dilapidation schedules, and timelines for negotiations to avoid costly and time-consuming litigation.”

You can read more about it on Justice.gov.uk

A dilapidations survey is an inspection carried out by a building surveyor to record lease breaches and estimate the costs to remedy them. These are put together by surveyors using a pricing matrix, the real world costs of contractors completing the work is often significantly less.

Prices are calculated using the Building Cost Information Service - Tier one contractors provide the data, by using a smaller contractor with less overheads you can typically save 30/40%.

The financial settlement figure is typically 30-40% larger than the real world costs of completing the work with your own specialist dilapidations contractors, before you hand back the keys.

Costs vary by property size, use, condition and lease terms. We have seen claims range from £5 to £40 per square foot.

A Dilapidations Settlement Agreement is one way for the landlord and tenant to resolve outstanding repair and reinstatement obligations by agreeing a financial sum or works in lieu of litigation. Another solution can be completing the work yourselves with a specialist dilapidations contractor like Workspace Dilapidations.

A Dilapidations Dispute arises when landlords and tenants disagree over possible lease breaches, liability or cost. These disputes often require surveyor negotiation or legal advice and can quickly become expensive and time consuming.

Landlords identify lease breaches, serve a Schedule, and pursue remedy or compensation. Tenants can negotiate or carry out works before lease expiry. Completing the work is usually the cheapest solution for existing tenants, all things considered. Once the Lease ends, completing work is not longer an option, your only option is to negotiate. If the lease has already expired your negotiation position is weakened.

Residential landlords must allow for ‘fair wear and tear’. In commercial property the tenant is usually required to reinstate to the condition the property was taken in - this is called Dilapidations.

Survey, negotiation, and settlement can take weeks to several months. Completing the work yourselves with a specialist dilapidations contractor may seem like a headache but it will save you a significant amount of money, typically 30-40%.

If you are proactive you can take control of the process and save time and money so you can focus on running your business. Negotiation and litigation typically gets costly very quickly and should generally be avoided if possible.

Take control - get advice and engage early. The deadline of Lease end gives the landlord the upper hand in any negotiation.

By completing the works yourself you can shift the power balance and take control of the costs and timeframes. In contrast, in a negotiation you are dealing with a third party and there are many elements out of your control, which can pose a risk to your business.

They are recognised as a liability when probable and measurable. Treatment depends on timing, materiality, and whether repairs are capital or revenue.

Generally, no. Dilapidation costs relate to past use, so they are usually treated as revenue expenditure, not capitalised.

Most dilapidations are revenue expenses as they relate to lease compliance, not enhancements. Capital treatment applies only in limited circumstances.

Dilapidations are a contingent liability and should be accounted for in line with UK accounting standards - usually as a provision where likely and quantifiable. If you need help accounting for this we can prepare an estimate of what the landlord will want to charge and realistic costs for completing the work using a specialist dilapidations contractor.

We are happy to assist your accountants if they need further clarification.

A report typically costs between £800 and £2,500 depending on property size and scope. It’s a worthwhile investment to manage risk. At the end of your tenancy your landlord will have this work completed, in a typical lease you will be responsible for paying them and the cost of serving. This is done in a formal fashion as a negotiation technique as well as to comply with dilapidations protocol.

A rent deposit is held by a landlord for non performance of obligations under the lease. A rent deposit deed will determine how this is kept and can be used. Subject to what the rent deposit deed says it may be possible to use it in settlement of dilapidations negotiations.

How to respond is laid out in the protocol as published on Justice.gov.uk.

You should also review the claim with a specialist dilapidations contractor, and a surveyor depending on the situation.

The landlord usually instructs the schedule of dilapidations, but requires the existing tenant to pay as part of the lease obligations.

Responsibility falls to the tenant if the lease obligations were not met. Costs can often be reduced by negotiation but you will make more significant savings by instructing a specialist dilapidations contractor, like Workspace Dilapidations, to complete the works yourself.

Yes. Landlords typically have six years from the end of the lease to bring a claim under the Limitation Act 1980.

Yes, dilapidation payments can be taxable income for landlords and tax deductible for tenants, subject to context and accounting treatment.

Usually yes, for tenants, if the payment relates to revenue repairs and not capital improvements. Always check with your accountant.

If you pay a financial settlement to the landlord it is normally outside the scope of VAT.

Any works that you carry out are likely to be VATable but if your company is VAT registered you are able to claim this back.