Asset Management Q&A
Asset Management Q&A: Recovering damages for dilapidations, Jonathan Ross answers your questions.
Q. Your tenant is leaving your premises in substantial disrepair as at the end of the lease. Do you have to carry out the repairs to recover damages for dilapidations?
You are free to do such works as you please or to leave it to the next tenant to deal with the disrepair as it sees fit in return for a rent free period. The fact premises are in disrepair may open up opportunities for development or refurbishment. Pursuant to the Landlord and Tenant Act 1927, damages for disrepair are limited to the diminution in value of your interest as at lease expiry.
Essentially, the question to be asked is how much less are your premises worth because of the disrepair?
The answer will depend on whether the repairs are worth doing or whether, even if the premises had been left in repair, you would have redeveloped or refurbished or taken any other steps which would have superseded any repair works.
If you do undertake the repair works for good reason, you would expect to be able to recover these costs, so long as they are reasonable.
If, for example, a roof is left needing patch repairs costing £20,000 but you decide to replace it for £40,000 so as to have a long term solution, you can recover the £20,000 if you can establish that you would not have installed a new roof if the tenant had spent £20,000 on patch repairs.