Commercial Property Law

Dilapidations Commercial Lease UK — Terminal Dilapidations, the s.18 Cap, Scott Schedule, and Break Clauses

Covers terminal vs interim dilapidations; the Jervis v Harris clause (cost recovery as a debt during the term); Scott Schedule process and RICS Protocol; LTA 1927 s.18(1) diminution in value cap and supersession (Ultraworth [2000]); and the critical interaction between break clauses and dilapidations compliance conditions.

22 min readUpdated 8 June 2026Last reviewed: 17 May 2026dilapidationscommercial-leasescott-schedulelta-1927

Terminal vs Interim Dilapidations and the Jervis v Harris Clause

Interim dilapidations arise during the lease; the landlord generally cannot recover repair costs as damages without a Jervis v Harris clause. A Jervis v Harris clause ([1996] Ch 195) allows the landlord to enter, carry out repairs, and recover the cost as a debt — not subject to the LTA 1927 s.18(1) cap. Terminal dilapidations arise at lease end; recovery is in damages; subject to the s.18(1) cap. RICS recommends serving the terminal schedule within 56 days of lease end.

The Scott Schedule — Quantifying the Claim

The Scott Schedule lists each alleged breach, the remedial work, the landlord's claimed cost (from the landlord's building surveyor), and the tenant's response (from the tenant's surveyor). Both surveyors may give expert evidence in court. The landlord's valuer must separately quantify the diminution in the value of the landlord's reversion for the s.18(1) analysis. Pre-action process: schedule → counter-schedule → without-prejudice negotiation → mediation → litigation.

LTA 1927 s.18(1) Cap — Diminution and Supersession

Section 18(1) LTA 1927: (a) first limb — damages capped at the diminution in value of the landlord's reversion caused by the disrepair (often significantly less than remediation cost); (b) second limb — no damages where the property is to be pulled down or substantially altered making repairs valueless (supersession). Supersession requires evidence of genuine landlord plans at or shortly after lease end (Ultraworth Ltd v General Accident [2000]). Always obtain a RICS diminution valuation.

Break Clauses and Dilapidations

A break clause conditional on 'no material breach of covenant' at the break date is invalidated by a breach of the repairing covenant — even a minor breach. Dilapidations liability is assessed at the break date (not lease expiry), which can significantly reduce the tenant's liability. Marks and Spencer v BNP Paribas [2015] UKSC 72: advance rent paid beyond the break date is not recoverable without express provision. Tenants: commission a dilapidations survey well before the break notice date and remedy disrepair proactively.

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Commercial Lease Dilapidations 2026

Dilapidations Commercial Lease — Schedule of Dilapidations, Section 18(1) LTA 1927 Diminution Cap, Jervis v Harris and RICS Protocol

Commercial lease dilapidations guide 2026: dilapidations are the tenant's obligations under a commercial lease to repair, decorate, and yield up the premises in compliance with the lease covenants — and to remedy breaches at the end of the lease (terminal dilapidations) or during the term (interim dilapidations). Key elements: (1) Terminal dilapidations: served at or after lease expiry — the primary remedy; schedule prepared by RICS chartered surveyor (each item of disrepair; works required; estimated cost); Scott Schedule (tenant responds item by item — agree/dispute/partial). (2) Interim dilapidations: served during the lease where the tenant is causing serious damage. (3) Diminution in value cap (s.18(1) LTA 1927): damages capped at the fall in the market value of the landlord's reversion caused by the disrepair; if the landlord intends to demolish or reconstruct ('supersession'), the claim may be extinguished. (4) Jervis v Harris [1996] Ch 195: clause allowing the landlord to enter, carry out works, and recover the cost as a DEBT — bypasses the s.18(1) cap. (5) RICS Dilapidations Protocol (England/Wales): 56-day timetable for terminal schedule; 56 days for tenant response; negotiation; mediation before litigation. Scotland: no s.18(1) statutory equivalent; common law diminution principles apply.

Commercial Dilapidations Law

Section 18 Dilapidations Cap — Landlord and Tenant Act 1927

Section 18(1) LTA 1927: two caps on commercial dilapidations damages. Diminution cap: damages cannot exceed reduction in value of landlord's reversion caused by breach of repairing covenant (Jones v Sherwood Computer Services [1992]). Supersession cap: damages nil where landlord intends to demolish or structurally alter property so repairs would be valueless (Salisbury v Gilmore [1942]; Hibernian Property v Liverpool Corporation [1974]). Cost of works is starting point not ceiling. Jervis v Harris [1996]: landlord carries out repairs under self-help clause and recovers as debt — s.18(1) does not apply to debt claims. Terminal schedule of dilapidations; Scott Schedule; RICS Dilapidations Guidance Note (7th ed 2016). Scotland: no s.18 equivalent; common law obligation to repair and deliver up at ish.

Commercial Lease Obligations

Licence to Alter — Commercial Lease Consent to Alterations UK

Commercial lease alterations covenant: absolute (landlord has complete discretion to refuse); qualified (consent required — s.19(2) LTA 1927 applies to improvements; consent cannot be unreasonably withheld; landlord can require reinstatement, compensation for diminution, payment of costs); fully qualified (RICS recommended). LTA 1927 ss.1-3: tenant's right to compensation for improvements at lease end; s.3 notice procedure; compensation capped at lesser of net addition to letting value or reasonable cost. Licence to alter deed: description of works; conditions; reinstatement obligation; building regulations; planning. Scotland: no LTA 1927 equivalent; courts apply reasonableness test to qualified consent provisions.

Commercial Property

Terminal Dilapidations UK