The Dilapidations Protocol
Leases will almost always require a Tenant to keep a property in good repair and decorate internally and externally on a periodic basis. Also, it is common for a lease to oblige a Tenant to return the property to the Landlord at the conclusion of the lease in the same condition it was in as at the commencement of the lease. Where significant alterations may have been carried out to the property during the term of the lease, this may necessitate substantial works being undertaken.
It is important that the parties to a lease consider well in advance of the expiry of the lease what obligations are imposed with regards the condition in which the property should be returned to the Landlord on expiry of the lease. Unfortunately, too often this is overlooked with the result that a dilapidations dispute arises.
Dilapidations claims can be protracted and very costly, especially when proceedings are issued. The Pre-Action Protocol for Claims for Damages in relation to the Physical State of Commercial Property at the Termination of a Tenancy - "the Dilapidations Protocol" - came into force as part of the Civil Procedure Rules on 1 January 2012 with the aim of focussing the minds on settlement, minimising costs and reducing the likelihood of proceedings being issued.
Under the Dilapidations Protocol, a procedure has been put in place which provides for:
* the service of an itemised Schedule of Dilapidations by the Landlord
* the service of a formal Response by the Tenant
* the parties engaging in alternative dispute resolution to try and reach a settlement
* proceedings are to be regarded as a means of last resort
Landlord`s claims for dilapidations are always treated with some scepticism as there is almost an expectation that the claim will have been embellished and the costings inflated so as to maximise the Landlord`s starting point for negotiations.
The Dilapidations Protocol attempts to address that problem by requiring the Landlord`s Schedule of Dilapidations, together with the Tenant`s Response in Reply, to confirm that in the opinion of the landlord/tenant or their surveyor, the works set out in the Schedule are reasonably necessary to satisfy the tenant`s covenants in the lease, the costs provided for those works within the Schedule are reasonable and the Landlord`s future intentions for the property have been considered.
The failure by a party to substantially comply with the Protocol could result in costs sanctions being imposed by the Court if proceedings are issued. As with other Pre-Action Protocols, the core message of the Dilapidations Protocol is that the parties should, where possible, seek to resolve dilapidations disputes amicably by adopting a conciliatory and pragmatic approach and by viewing the proceedings as a means of last resort.
Posted on: 31/01/2012
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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