Dilapidations: No claim if no works done
A lot of money can be gained (or recouped) by landlords pursuing dilapidations claims. The tenant has much to lose. One question has been on the minds and lips of surveyors for as long as dilapidations claims have been around. Does the landlord have to do the works before the claim can ever be successful?
Different centuries have given us different cases and different angles on this, but it has never gone away. Not so long ago it received a mention in Moor Row v DWF  in the Scottish courts. Tenant’s advisers often look to use the dilaps trope “You have no loss if you haven’t done the works” as a stick to beat the landlord’s team, operating on the basis that the landlord will feel it is at significant risk of failure if pursuing a dilapidations claim but knowing that it is unlikely to do the works.
This can then lead to a “who blinks first” dynamic in negotiations. These are often continued not only through surveyor/lawyer negotiations, but also at arbitration and litigation. These dispute processes are often used as a tool to obtain satisfactory settlement terms. They can be used to very good effect, if used prudently.
So, what’s the answer to the question? Can you claim for dilapidations without doing the works?
The answer is this: what the landlord has to show is that (a) works have not been done by the tenant which should have been done in breach of contract, (b) the proper way to measure the loss to the landlord is the “estimated or actual cost of repairs”. Provided the landlord can show this, it’s home-free (at least on the question posed above).
From the tenant team’s perspective, its task is to try to show that because the works are not actually going to be done, this is simply the wrong “measure of loss”. If there has been loss, and no works are going to be done, then they can argue that the “diminution in value” measure of loss is more appropriate. That is a whole different topic, for a separate blog.
The burden of proof and so the hurdle, lies at the tenant’s door not the landlord’s door. It is the tenants who have to show that for some reason it is more likely than not that these works are not going to be done. That might sound easy, but it can be an uphill struggle – a landlord’s intentions can shift around depending on the commercial circumstances, and so it is entirely possible that during the course of the negotiation/dispute this can change, quite legitimately.That is what makes a dilapidations negotiation/dispute one that has to be handled robustly but also carefully.
If the tenant feels it does have enough ammunition to “prove” that the landlord will never do the works, then it is the one holding the aces. When push comes to shove, having a hunch, or even having some evidence that suggests in certain circumstances the landlord might not do the works, is not at all the same as proof that the landlord won’t do the works.
So the bottom line is – as a tenant, by all means make the argument, but be prepared to back it up with hard evidence, or be ready to see it melt away if negotiations are toughed out by the landlord.
14th July 2020
We explore the impact of the Code of Practice for commercial property relationships.
15th June 2020
Details of commercial lease obligations, summary diligence and the Corporate Insolvency Bill.
1st April 2020
What do the changes mean for landlords and tenants?