For many small-business tenants, the most expensive surprise in a commercial lease arrives at the end of it: a dilapidations claim. The landlord sends a schedule listing everything you allegedly failed to repair, redecorate or reinstate, with a bill that can run into tens of thousands of pounds. Tenants who have never faced one often pay far more than they owe, because they do not know how the claim is valued or what they can challenge.
This guide explains dilapidations from the tenant’s side: what a claim is made of, how the process runs, the legal cap that limits what a landlord can recover, and the practical steps that cut the bill.
What dilapidations actually are
Dilapidations is the name for a tenant’s failure to comply with the lease obligations that relate to the property’s condition. In practice, that means three covenants found in almost every commercial lease: repair; redecoration, commonly every three years inside and every five years outside, plus a final redecoration; and reinstatement — removing alterations you made and returning the property to its original layout, even if your alterations improved it. Claims can also cover statutory compliance obligations, such as fire safety requirements tied to the lease.
A claim is about breach of the lease, not general wear and tear: if the lease did not oblige you to do something, the landlord cannot claim for it. Our key-terms guide explains these covenants in plain English.
What a claim is made of
A terminal claim, made at the end of the lease, is not just a list of repairs. The quantified demand that accompanies the schedule usually includes several layers: the remedial works themselves; loss of rent, service charge and rates for the period the works would take; professional fees for the landlord’s surveyor and sometimes solicitor; and VAT where applicable.
Each layer can be challenged separately. Loss of rent is often the softest part: a landlord who re-lets quickly will struggle to justify a long void period. Professional fees must be reasonable and are usually only recoverable if the lease allows it. Never accept a headline figure without the breakdown behind it.
Interim, terminal and final claims
Interim claims are served during the term to push a tenant to keep up with its obligations. There is no fixed statutory procedure for them, but ignoring one is a mistake, because early disrepair only gets more expensive. Terminal claims are served in the run-up to expiry or shortly afterwards, and these are the big ones. Final claims follow after the term has ended, where the landlord seeks damages rather than the works themselves.
The practical difference is leverage. During the term, you can carry out works at your own prices. After expiry, you generally cannot — the landlord does the work, or claims the money, and you lose control of the cost.
How a claim unfolds: the Dilapidations Protocol
Terminal claims in England and Wales follow the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy, usually called the Dilapidations Protocol. Courts expect both sides to follow it before litigation:
- The landlord serves a schedule of dilapidations, normally within 56 days of the end of the term (it can also be served before expiry), with a quantified demand substantiating the sum claimed.
- The tenant responds, usually within 56 days, dealing with each item — accepted, disputed, or disputed in part.
- Both sides are encouraged to meet on a without-prejudice basis, normally within 28 days of the response, to narrow or settle the dispute.
- If the tenant relies on a diminution-in-value defence, it should say so and provide its own valuation, usually within 56 days of receiving the quantified demand.
The protocol also helps tenants: the landlord’s surveyor must endorse the schedule, confirming the works are reasonably required, the costings are reasonable, and full account has been taken of the landlord’s intentions for the property.
The Section 18 cap: the tenant’s strongest protection
The most important law for tenants is Section 18(1) of the Landlord and Tenant Act 1927. It caps what a landlord can recover for breach of a repairing covenant at the diminution in value of the landlord’s reversion caused by the disrepair. In plain English: the landlord cannot recover more than the actual loss in the property’s value, even if the cost of the works is higher.
Example: the schedule’s works cost £300,000, but valuation shows the property in repair would be worth £1,000,000 and in disrepair £850,000. The diminution is £150,000 — and that is the cap. The claim for repair items cannot exceed £150,000, however long the schedule is.
Section 18 has a second limb that can be stronger still. If, at or shortly after the end of the tenancy, the property will be demolished or structurally altered so that the repairs would be valueless, no damages are recoverable for those repairs at all. A landlord planning a full refurbishment cannot also charge the outgoing tenant for repairs it was going to rip out anyway.
Two related arguments cut claims further. Supersession applies where the landlord’s own planned works would replace the tenant’s alleged works. Betterment applies where the schedule would leave the property in better condition than the lease required.
How to cut the bill: seven tenant tactics
1. Get a schedule of condition attached to the lease
This is the single most effective protection, and it costs little at the outset: a photographic and written record of the property’s state on the day you take it, prepared by an independent surveyor and annexed to the lease. It caps your obligation at returning the property to that recorded condition — not to some notional standard of good repair. Without one, you can be charged for disrepair that existed before you arrived. See our hidden-costs guide for what else to check before signing.
2. Limit your repairing covenant when you negotiate
Before signing, check what you are taking on. Are you responsible for the structure and roof, or only the interior? Are latent defects excluded? Can liability be capped at a fixed sum? Tenants routinely sign full repairing leases on older buildings without realising the roof alone could cost more than a year’s rent. See our lease-negotiation guide for the clauses worth fighting over.
3. Keep up with maintenance during the term
Small, regular spending beats one large bill. Clearing gutters annually, treating minor roof defects early and keeping up the decoration cycle all prevent deterioration that becomes a five-figure schedule item. Keep dated photographs and invoices as evidence.
4. Get your own surveyor in early
Eighteen months before lease end is not too soon; twelve months is the latest to leave it. Your surveyor can prepare an exit schedule, price works at market rates, and tell you which items are genuinely yours. Doing the works yourself, while you still have access, is almost always cheaper than paying the landlord’s schedule.
5. Ask for the landlord’s schedule before expiry
Requesting the landlord’s schedule in advance aligns both sides early and gives you time to complete agreed works before the term ends, rather than arguing afterwards.
6. Challenge every item, not just the total
A schedule is a negotiation document, not a court judgment. Go through it line by line: items outside your covenant, items covered by the schedule of condition, items superseded by the landlord’s plans, items priced above market rates, and loss-of-rent periods longer than the works require.
7. Negotiate a cash settlement — and know when to take it
A negotiated settlement often beats doing the works. The landlord avoids a void period; you avoid contractor risk and overrunning past expiry, which can create further liability. Discussions are usually without prejudice, so both sides can make realistic offers. Open with a reasoned, itemised response with your own costings and, where relevant, a diminution valuation.
Your lease-end timeline
At signing, get the schedule of condition annexed and check the covenant’s scope. During the term, keep up the decoration cycle and log maintenance. Eighteen months before expiry, instruct your surveyor and decide whether to do works or negotiate. Twelve months out, request the landlord’s schedule and start agreed works in time to finish before expiry. At expiry, hand back cleanly, with nothing half-finished. Afterwards, scrutinise the quantified demand item by item, respond within the protocol timetable, and pursue a settlement meeting before anyone talks about court. Check our break-clause guide too if you face a break date rather than a full expiry.
Frequently asked questions
Can a landlord claim dilapidations if I am renewing?
Normally a terminal claim is about the end of a term. If you stay on under a new lease, dilapidations are usually dealt with in the renewal negotiation — but do not assume they disappear, so raise them early.
What if we cannot agree?
Most claims settle through surveyor negotiation or mediation. If they do not, the landlord can issue proceedings, but must show substantial compliance with the Dilapidations Protocol first, and the court will apply the Section 18 cap on valuation evidence.
The bottom line
A dilapidations claim feels like a bill, but it is really a negotiation with a legal ceiling: the Section 18 cap, the landlord’s actual loss in value, not the cost of its schedule. Tenants who prepare — schedule of condition, maintenance during the term, their own surveyor eighteen months before expiry, an item-by-item response — rarely pay the headline figure.