There are two forms of dilapidations claim: terminal dilapidations (served at or after the end of the lease, quantifying the cost of the tenant's unremedied breaches) and interim dilapidations (served during the lease, typically where the tenant is actively causing damage or is in breach of an urgent repair covenant). Terminal dilapidations are the more common and financially significant claim.
The diminution in value cap under Section 18(1) of the Landlord and Tenant Act 1927 is the most important concept in English and Welsh dilapidations law. Even if the cost of carrying out all required repairs would be £500,000, the landlord cannot recover more in damages than the reduction in the market value of the landlord's reversion caused by the disrepair. Where the landlord intends to demolish or substantially reconstruct the property (so that the repairs would immediately be undone by the landlord's own works), the 'supersession' rule may extinguish the dilapidations claim entirely. These limitations make the appointment of a specialist RICS-chartered building surveyor essential.
Schedule of dilapidations, Scott Schedule, s.18(1) LTA 1927 diminution cap and Jervis v Harris
The key stages and legal framework of a commercial lease dilapidations claim:
- Schedule of dilapidations, Scott Schedule and the RICS Dilapidations Protocol: Schedule of dilapidations: a formal document prepared by a RICS-chartered building surveyor on behalf of the landlord, setting out: (a) each item of alleged disrepair (or breach of the decorating/yielding up covenant); (b) the works required to remedy each item; (c) the estimated cost of each item; (d) the total claim value. Terminal schedule: served at or after the expiry of the lease. Interim schedule: served during the term — less common; used where the tenant is causing active and serious damage (e.g., stripping fixtures; structural neglect). Scott Schedule: once the terminal dilapidations schedule is served, the tenant's surveyor prepares a Scott Schedule — a column-by-column response to each item in the landlord's schedule, indicating: (i) agreed in full; (ii) disputed in full (with reasons); (iii) partial agreement (agreed cost lower than claimed). The Scott Schedule is the key negotiation document and (if proceedings are issued) the pleading document in the First-tier Tribunal or county court. RICS Dilapidations Protocol (England and Wales): the RICS Building Disputes Resolution Service operates a Dilapidations Protocol that sets out: (a) the landlord should serve the terminal schedule within 56 days of lease expiry; (b) the tenant has 56 days to respond with a Scott Schedule; (c) the parties should then negotiate in good faith (surveyors' meeting recommended); (d) mediation should be attempted before litigation. Costs consequences apply if a party fails to follow the Protocol — the court may take non-compliance into account on costs orders. Pre-action obligations: parties should exchange Diminution Valuation evidence (s.18(1) valuation) before proceedings are issued.
- Section 18(1) LTA 1927 diminution cap, supersession and Jervis v Harris [1996] clauses: Section 18(1) of the Landlord and Tenant Act 1927 (England and Wales): the most important statutory provision in dilapidations law. It provides that: (a) the landlord's damages for breach of a repairing covenant are capped at the diminution in the value of the landlord's reversion — the reduction in the market value of the landlord's interest in the property caused by the tenant's failure to comply with the repairing obligation; and (b) where the landlord intends to demolish, pull down, or carry out structural alterations to the premises at or shortly after the end of the tenancy that would render the repairs valueless ('supersession'), no damages at all are recoverable for breach of the repairing covenant. This is the 'supersession' rule. Diminution valuation: to establish the diminution in value, the landlord commissions a Diminution Valuation (typically by a chartered surveyor specialising in valuation) comparing: (a) the market value of the landlord's interest with the property in the condition required by the lease at expiry; against (b) the market value of the landlord's interest in the actual condition at expiry. The landlord can only recover the lesser of: the estimated cost of works; or the diminution in the value of the reversion. Jervis v Harris [1996] Ch 195 (Court of Appeal): the Jervis v Harris mechanism operates where the lease contains a specific clause allowing the landlord to enter the property (during the lease term, after giving notice and the tenant failing to repair), carry out the works themselves, and recover the cost as a contractual debt — NOT as damages. The critical importance is that the s.18(1) diminution cap applies only to claims for damages in tort or breach of contract; it does NOT apply to a debt recovery claim under a Jervis v Harris clause. A well-drafted Jervis v Harris clause therefore allows the landlord to recover the full cost of the repair works without being limited by the diminution in the reversion value. Requirements: the clause must be clearly worded; the landlord must serve a notice of breach specifying the repair required; a reasonable time must be given for the tenant to comply; the landlord then carries out the works and issues an invoice as a contractual debt. Scotland: there is no statutory equivalent of s.18(1) LTA 1927 in Scotland. However, Scottish courts apply common law principles limiting the landlord's recovery in dilapidations claims to the actual loss suffered — in practice, a similar diminution in value principle operates. Scottish commercial leases may also include Jervis v Harris equivalent provisions. The RICS Dilapidations Protocol applies in England and Wales only — Scottish dilapidations claims follow the process set out in the lease and Scottish civil procedure
Frequently asked questions
What are dilapidations in a commercial lease?+
Dilapidations are a tenant's obligations under a commercial lease to keep the property in repair, to decorate it as specified in the lease, and to yield it up at the end of the term in the condition required by the lease covenants. When the tenant fails to comply, the landlord can serve a schedule of dilapidations setting out the alleged breaches and the estimated cost of remedying them. The most common and financially significant claim is the terminal dilapidations schedule, served at or after lease expiry.
What is the Section 18(1) LTA 1927 diminution cap and how does it limit a dilapidations claim?+
Section 18(1) of the Landlord and Tenant Act 1927 caps the landlord's damages claim for breach of a tenant's repairing covenant at the diminution in the value of the landlord's reversion — the reduction in the market value of the landlord's interest caused by the disrepair. Even if the cost of the required repairs is £500,000, the landlord can only recover the amount by which the property's market value (as the landlord's interest) has been reduced. Additionally, if the landlord intends to demolish or reconstruct the property ('supersession'), the entire dilapidations claim may be extinguished because the repairs would immediately be rendered valueless by the landlord's own works.
What is a Jervis v Harris clause and how does it avoid the Section 18(1) cap?+
A Jervis v Harris clause (following Jervis v Harris [1996] Ch 195) is a lease provision allowing the landlord to enter the property (after giving notice and allowing the tenant a reasonable time to repair), carry out the repair works themselves, and recover the cost as a contractual debt — not as damages for breach of the repairing covenant. The Section 18(1) LTA 1927 diminution cap applies only to damages claims; it does not apply to a debt recovery claim under a Jervis v Harris clause. This allows the landlord to recover the full cost of the works without the diminution cap limitation, provided the clause is correctly worded and the procedure is followed.
What is the RICS Dilapidations Protocol timetable?+
The RICS Dilapidations Protocol (England and Wales) provides that: the landlord should serve the terminal dilapidations schedule within 56 days of lease expiry; the tenant then has 56 days to respond with a Scott Schedule (item-by-item response); the parties should negotiate in good faith (a surveyors' meeting is recommended); mediation should be attempted before litigation. Courts take non-compliance with the Protocol into account on costs orders. The tenant's Scott Schedule is the key negotiation document — each item is marked as agreed, disputed (with reasons), or partially agreed.
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