When an industrial lease ends, the condition of the unit often becomes the biggest point of discussion. Dilapidations claims can run into tens of thousands of pounds, and most disputes come down to what the lease says and what was done about it before the end.
What are dilapidations?
Dilapidations are breaches of the repair, decoration and reinstatement obligations in a lease. Most industrial units are let on full repairing and insuring (FRI) leases. Under an FRI lease the tenant is responsible for keeping the unit in repair, and handing it back in the condition the lease requires.
Typical items on an industrial unit include:
- roof sheets, gutters and rooflights
- loading doors and their motors
- concrete floors damaged by forklifts or racking
- yard surfacing, fencing and drainage
- office fit-out, partitions and mezzanines put in by the tenant
- redecoration at the end of the term
Interim and terminal schedules
A landlord can serve an
interim schedule during the lease, listing repairs the tenant needs to carry out. A
terminal schedule is served near or after the end of the lease, and sets out the work needed and its cost.
Claims in England and Wales follow the Dilapidations Protocol. It sets out how the landlord should present a claim, how the tenant should respond, and the expectation that both sides try to settle without going to court.
The limit on what a landlord can recover
Under section 18 of the Landlord and Tenant Act 1927, damages for disrepair cannot exceed the loss in value of the landlord's interest. If the landlord plans to demolish the unit, or carry out works that would make the repairs pointless, the claim can be reduced or removed altogether.
For tenants: how to avoid a large bill
- Read the repair and reinstatement clauses well before the lease ends. 12 to 18 months is sensible.
- Check whether a schedule of condition was attached to the lease. If it was, you may only need to return the unit in that condition.
- Get a surveyor to assess the likely liability early. Doing the work yourself is often cheaper than paying the landlord's estimate.
- Keep photos and records of any repairs done during the lease.
- Ask whether the landlord will accept a cash settlement instead of works, so you can leave on time.
For landlords: how to protect the value of your unit
- Attach a dated schedule of condition, with photos, to every new lease.
- Inspect during the lease and serve an interim schedule if repairs are being missed.
- Plan the next letting early. If you intend to refurbish, your claim should reflect that.
- Keep the claim realistic. A claim that overreaches is harder to settle and slows the re-let.
Getting advice
Dilapidations combine legal and building questions. Most landlords and tenants use a building surveyor for the schedule and a solicitor for any dispute. We help landlords plan the end of a lease around the next letting, so the unit is back on the market quickly and with the right specification.
If you own an industrial unit with a lease ending in the next 18 months,
book a free property assessment to talk through your options.
Related guides: Commercial lease terms explained,
How to let an industrial unit and
Asset management
