Dilapidations Process, Legislation and Section 18 Considerations

Dilapidations refer to breaches of lease obligations relating to the condition, repair, reinstatement, decoration or statutory compliance of a property, most commonly arising at lease expiry but also during the term of a lease. The dilapidations process is governed by the lease, statute and professional guidance and applies to commercial property in England and Wales.

Overview of the Dilapidations Process

The process typically begins with a detailed review of the lease to identify the tenant’s repairing, reinstatement and decoration obligations. A chartered building surveyor then inspects the property and prepares either an interim or terminal schedule of dilapidations setting out alleged breaches, required remedial works and estimated costs.

For terminal dilapidations, the landlord will usually serve a quantified demand. The tenant responds confirming which items are admitted or disputed. Most dilapidations claims are resolved through surveyor-led negotiations rather than litigation.

Legislation and Professional Guidance

Dilapidations claims are governed by a combination of contract law, statute and professional guidance. The key legislation is Section 18 of the Landlord and Tenant Act 1927, which places a statutory cap on damages for disrepair. The Limitation Act 1980 and common law principles of damages also apply, alongside RICS professional guidance.

Section 18 and Diminution in Value

Section 18(1) of the Landlord and Tenant Act 1927 limits a landlord’s recoverable damages for disrepair to the diminution in value of the landlord’s reversion. In simple terms, a landlord cannot recover more than the reduction in value caused by the tenant’s breaches, regardless of the cost of the works.

Diminution in value is a valuation exercise comparing the value of the landlord’s interest in repair with its value out of repair. It is not a cost-based assessment. Where the cost of works exceeds any loss in value, damages will be capped accordingly.

Section 18 considerations are particularly relevant where a landlord intends to redevelop or refurbish the property, or where the claimed works would be superseded. In such cases, dilapidations claims can be significantly reduced or extinguished.

Conclusion

Dilapidations claims are not purely cost-based exercises. Section 18 of the Landlord and Tenant Act 1927 plays a central role in limiting damages to actual loss. Early advice from specialist building surveying and valuation professionals is essential to ensure claims are reasonable, proportionate and legally compliant.