Commercial Property Dilapidations: The UK Guide for Tenants and Landlords
A 47-page Schedule of Dilapidations has just landed on your desk, and the final claim figure is large enough to affect your annual budget. Is it reasonable, is it negotiable, and what happens if you simply refuse to pay?
Dilapidations are one of the most financially significant moments in any commercial lease, and one of the most poorly understood. The terminology is intimidating, the legal framework is layered, and the figures can run into substantial sums for a single site. Yet many tenants only start thinking about dilapidations in the final months of their lease, when their negotiating position has already weakened.
This guide explains what dilapidations actually are, who pays, the different schedules tenants may face, and the practical steps that protect both landlords and tenants from getting caught out.
What are dilapidations?
Dilapidations are the breaches of lease covenants relating to the physical condition of a commercial property. In plain terms, they are the things a tenant has failed to repair, maintain, decorate, or reinstate during the lease, which the landlord is entitled to claim against at or near lease end.
The framework is governed by the lease itself, supported by the Landlord and Tenant Act 1927 (Section 18) which caps damages, the Civil Procedure Rules Pre-Action Protocol for Dilapidations Claims, and case law that continues to shape how disputes are resolved.
Who is responsible?
Responsibility depends on the lease type:
- Full repairing and insuring (FRI) leases: the tenant carries full repair and reinstatement obligations.
- Internal repairing leases: the tenant covers internal repairs, the landlord covers structural elements.
- Service charge arrangements in multi-let buildings: repair obligations may be shared, with detailed allocation set out in the lease.
The general principle is that the lease document is the source of truth. Tenants who assume fair wear and tear exempts them from significant remedial work are often disappointed. In commercial leases, the exemption is narrow and rarely covers the items that drive the largest claims.
Types of dilapidations schedules
There are three principal schedules a tenant may face during a lease lifecycle, each with a different purpose and timing.
| Schedule Type | When Served | Purpose |
|---|---|---|
| Interim Schedule | During the lease term | Forces the tenant to remedy disrepair while still in occupation |
| Terminal Schedule | Up to 12 months before lease end | Sets out the works the landlord expects at lease expiry |
| Final Schedule | At or after lease end | Quantifies the landlord’s actual claim |
The terminal schedule is the one that drives most commercial disputes. It typically arrives 6 to 12 months before lease expiry, and the size of the demand often comes as a shock to tenants who have not been preparing.
What does a dilapidation claim typically cover?
A schedule is built from line-item observations against the tenant’s lease covenants. Categories commonly included are:
| Category | Typical Examples |
|---|---|
| Structural and fabric repairs | Roof, walls, windows, external decoration |
| Mechanical and electrical | HVAC, lighting, electrical compliance, plumbing |
| Internal repairs and decoration | Walls, ceilings, floor coverings, internal paintwork |
| Reinstatement | Removing tenant alterations and reinstating the original layout |
| Yielding up | Removal of fixtures, cleaning, returning the premises in compliant condition |
The schedule is usually prepared by a chartered surveyor acting for the landlord, with each item cost and supported by reference to the relevant lease clause.
How to challenge a Schedule of Dilapidations
Receipt of a schedule is the start of a negotiation, not the end of it. The Pre-Action Protocol for Dilapidations Claims sets out the expected process, and most claims settle for considerably less than the original figure. Common grounds for challenging items include:
- Items that fall outside the tenant’s actual repair covenant.
- Costs that exceed the Section 18 cap, which limits damages to the diminution in the landlord’s reversionary value.
- Items already addressed by the tenant before lease end.
- Works the landlord intends to override anyway through refurbishment or redevelopment.
- Items where the cost figure is not commercially reasonable.
Tenants are entitled to instruct their own surveyor to produce a counter-schedule and to challenge each item systematically.
How to prepare for lease end
The tenants who fare best at lease end are the ones who started thinking about dilapidations 18 to 24 months out, not 3. Practical steps include:
- Review the lease early. Identify the exact scope of repair, decoration, reinstatement, and yielding-up obligations.
- Commission a tenant-side condition survey. This gives an independent view of likely exposure before the landlord drives the conversation.
- Address known items during occupation. Carrying out work directly is almost always cheaper than paying damages.
- Document everything. Photographs of condition, records of repairs completed, and evidence of agreed alterations all become valuable later.
- Engage a facilities partner with lease-end experience. Coordinated remedial works delivered by a single contractor are quicker and easier to manage than scrambling at the eleventh hour.
Where to go from here
At TMS Facilities Management, our Planned and Lease-End Works team helps commercial tenants across the UK and Ireland prepare for, negotiate, and complete dilapidations works. We carry out condition surveys, deliver coordinated remedial programmes, and work alongside tenant-side surveyors to keep the process moving.If you would like to discuss an upcoming lease event or review a schedule you have already received, get in touch with our team.