Dilapidations: what a tenant owes at the end of a lease

The repairing covenant

Dilapidations is the name for the landlord's claim, at or towards the end of a lease, for the tenant's failure to comply with the covenants about the physical state of the premises. Three covenants usually contribute: the covenant to repair, the covenant to decorate at stated intervals and at the end, and the covenant to reinstate alterations, removing the partitions, cabling and fit-out the tenant installed and making good.

The repairing covenant is the core of it, and its wording matters more than tenants expect. A covenant "to keep the premises in good and substantial repair" has been read by the courts for over a century as including an obligation to put them into that state first. A tenant who took premises with a leaking roof and a covenant in those terms took on the roof. A full repairing lease, where the tenant repairs the whole building including structure and exterior, carries far more than an internal repairing lease of a unit in a building the landlord maintains through a service charge.

Repair means the remedying of disrepair, which is deterioration from a previous better condition. It does not generally require the tenant to improve the premises or to fix an inherent defect that has never caused deterioration, although where the only practical way to repair damage is to cure the defect that caused it, the tenant can end up doing so. Our guide to commercial leases covers the repairing clause at the point of negotiating it.

The standard of repair

The lease sets the standard in words such as "good", "substantial" or "tenantable" repair, and the courts have long measured those words against the age, character and locality of the premises at the date of the lease. The standard is the condition in which a reasonably minded tenant of the class likely to take the premises would expect to find them, so a Victorian warehouse is not held to the standard of a new office, and the standard does not rise because the area has since become fashionable.

What that requires for a worn carpet, a boiler past its service life or a flat roof at the end of its useful life is decided by surveyors, item by item, against the covenant and the condition at the start of the term.

Interim and terminal schedules

The landlord's claim is set out in a schedule of dilapidations prepared by its surveyor. The schedule lists each alleged breach, the clause of the lease it breaches, the work required to remedy it and the estimated cost.

An interim schedule is served during the term, where the landlord wants the work done while the tenant is still in occupation. It is usually the prelude to a forfeiture notice or a claim for damages during the term, and it is subject to the restrictions described below.

A terminal schedule is served in the last months of the term or after it has ended, and it founds the claim for damages for the state of the premises at expiry. Most dilapidations claims are terminal, and the rest of this guide is about them.

Some leases give the landlord a right to enter during the term, serve notice of what needs doing, and do the work itself if the tenant does not, recovering the cost as a debt. That route avoids the cap on damages, and a tenant faced with such a notice should take it seriously.

Claims during the term

A landlord who wants to enforce the repairing covenant before the lease ends has two obstacles. Section 146 of the Law of Property Act 1925 prevents forfeiture for breach of covenant unless the landlord first serves a notice specifying the breach, requiring it to be remedied where it can be, and requiring compensation, and then allows a reasonable time for the tenant to comply.

The Leasehold Property (Repairs) Act 1938 adds a second where the lease was granted for seven years or more and has at least three years left to run. The section 146 notice must tell the tenant of the right to serve a counter-notice, and if the tenant serves one within 28 days the landlord cannot forfeit or sue for damages without the leave of the court. Leave is only given where the landlord proves one of the grounds in the Act, such as that immediate repair is needed to prevent a substantial fall in the value of the landlord's interest, or to comply with a statute or a court order.

Neither protection applies once the lease has ended, which is why most claims are made then.

The Dilapidations Protocol

Terminal claims are governed by the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy, known as the Dilapidations Protocol, which forms part of the Civil Procedure Rules. A party who ignores it risks costs penalties if the matter reaches court.

The Protocol expects the landlord to send the schedule within a reasonable time after the lease ends, which it says will generally be within 56 days. The schedule must be in the prescribed form, must set out the breaches, the works required and the landlord's costings, and must be endorsed by the landlord's surveyor confirming that the works are reasonably required to remedy the breaches, that the costs are reasonable, and that the surveyor has taken account of what the landlord intends to do with the premises. That endorsement is meant to stop the practice of serving a schedule for every conceivable item and negotiating down from there.

The landlord also sends a Quantified Demand, and the tenant responds within a reasonable time, generally 56 days from the demand. The Protocol expects the parties to meet, generally within 28 days after the tenant's response, on a without prejudice basis, to narrow the issues. Before issuing proceedings the landlord must quantify its loss, either by a formal diminution valuation or by evidence of what it has spent, unless in all the circumstances that would be unreasonable.

The section 18 cap

The cost of the works in the schedule is the starting point, and it is not the measure of what the tenant pays. Section 18(1) of the Landlord and Tenant Act 1927 provides that damages for breach of a covenant to keep or put premises in repair shall in no case exceed the amount by which the value of the landlord's reversion is diminished by the breach. The reversion is the landlord's interest in the premises, and the question is how much less it is worth with the disrepair than it would be without it.

The second limb of the subsection goes further. No damages are recoverable for failure to leave premises in repair at the end of a lease if it is shown that the premises would, at or shortly after the end of the term, have been pulled down or so structurally altered that the repairs would be rendered valueless. A landlord who is about to strip the building back for redevelopment recovers nothing for the tenant's failure to redecorate.

The cap bites in several common situations. Where the landlord relets the premises to a tenant who will fit them out to its own design, the incoming tenant's works overtake much of the schedule and the diminution is small. Where the landlord sells the building and the buyer paid no less because of the disrepair, the diminution may be nil. Where the market for that kind of premises has moved on and the building will be converted, the second limb applies. A tenant facing a large schedule should ask, before anything else, what the landlord is actually going to do with the premises.

The cap applies to the repairing covenant. Claims for failure to reinstate alterations and for failure to decorate are treated differently, and how far section 18 reaches them depends on how the covenants are drawn, so the schedule should be examined item by item to see which covenant each item relies on.

The Quantified Demand and the response

The Quantified Demand is the landlord's statement of what it claims in money. It sets out the cost of the works in the schedule, any loss of rent for the period the works would take, the landlord's professional fees, VAT where the landlord cannot recover it, and any other losses. It should say what the landlord intends to do with the premises and whether it has considered the section 18 position, and it should be in a form the tenant can respond to line by line.

The tenant's response is prepared with its own surveyor and should deal with every item: whether the item is in disrepair at all, whether it falls within the covenant, whether the proposed work is more than the covenant requires, whether the cost is reasonable, and whether the item is caught by the section 18 cap or the demolition limb. The response should also raise any schedule of condition, any consents for alterations that relieve the tenant of reinstatement, and any works the landlord has done or the incoming tenant will do that make the claimed item irrelevant.

The Protocol expects the tenant's surveyor to endorse the response in the same way the landlord's endorsed the schedule.

Negotiating and settling

Most dilapidations claims settle, usually at a figure well below the schedule and often well below the Quantified Demand. The tools are the section 18 argument, the evidence of what the landlord intends, the schedule of condition, the reasonableness of the costings, and the landlord's own interest in a quick resolution while it markets the premises.

The negotiation runs between surveyors under the Protocol's without prejudice meetings, with solicitors involved on the legal points and on the settlement document. A settlement should be recorded in a written agreement that releases the tenant from all claims arising from the state of the premises and the lease, including reinstatement and decoration, in return for the payment, and should deal with any rent deposit and any guarantor.

Where the tenant is still in occupation and has time, doing the work can be cheaper than paying for it, because the landlord's costings include fees, contingencies and loss of rent that the tenant's own contractor does not charge. A tenant who takes that route should agree the scope with the landlord's surveyor first and get written confirmation that the works satisfy the schedule, otherwise the claim comes back for the items the landlord says were missed.

Where the tenant is leaving under a break clause with a compliance condition, the dilapidations position has to be settled before the break date, because a subsisting breach on that date may defeat the break. Our guide to break clauses explains how those conditions work. Where the tenant is holding over under Part II of the Landlord and Tenant Act 1954 and the landlord opposes renewal, the state of repair can also be a ground of opposition, and our guide to business tenancy renewal covers that.

Limiting exposure from the start

The dilapidations claim is decided by the lease, and the lease is decided at the start. A tenant taking premises that are anything other than new should insist on a schedule of condition: a photographic and written record of the state of the premises on the day the lease is granted, prepared by a surveyor, agreed with the landlord and annexed to the lease. The repairing covenant is then qualified so that the tenant is not required to put the premises into any better condition than the schedule shows. The RICS Code for leasing business premises says that where the tenant's obligation is to be limited to the initial condition, a schedule will normally be required and the parties should agree who pays for it.

The schedule should be thorough. A dozen wide shots of a building are of little use in a dispute about one window ten years later; the surveyor should photograph every element and describe every defect in words as well as pictures.

Beyond the schedule, the repairing covenant itself can be narrowed. Exclude structure, roof and exterior in a lease of part, exclude inherent defects in a new building, limit the covenant to keeping the premises in no worse condition than at the start, and exclude fair wear and tear where the landlord will agree it. Make sure any consent to alterations says whether reinstatement will be required, because a licence for alterations that is silent leaves the tenant exposed to a reinstatement claim at the end. Keep the consents, the schedule and a record of every repair done during the term, because the dispute at the end is won by whoever has the better paperwork.

And plan the exit. A tenant who instructs its own surveyor a year before expiry, obtains its own assessment of what the covenant requires, and decides then whether to do the work or negotiate a payment, deals with the landlord from a position of knowledge. A tenant who first engages with the question when the schedule arrives has already conceded the initiative.

Frequently asked questions

What are dilapidations?

Dilapidations is the landlord's claim at or towards the end of a commercial lease for the tenant's failure to comply with its covenants about the state of the premises: to repair, to decorate and to reinstate alterations. The claim is set out in a schedule of dilapidations prepared by the landlord's surveyor, listing each breach, the work required and the cost, and it is pursued under the Dilapidations Protocol, which forms part of the Civil Procedure Rules.

Does a tenant have to pay the full cost of the works in the schedule?

Rarely. Section 18(1) of the Landlord and Tenant Act 1927 caps damages for breach of a repairing covenant at the amount by which the disrepair has reduced the value of the landlord's interest in the premises, and allows nothing where the landlord is going to pull the building down or alter it so that the repairs would be worthless. Where an incoming tenant will refit the premises, or the landlord has sold without a price reduction, the cap can bring the claim well below the schedule.

What is the Dilapidations Protocol?

It is the pre-action protocol under the Civil Procedure Rules for claims about the physical state of commercial premises at the end of a tenancy. It expects the landlord to send a schedule and Quantified Demand within a reasonable time, generally 56 days after the lease ends, endorsed by its surveyor; the tenant to respond within a reasonable time, generally 56 days; the parties to meet, generally within 28 days after the response; and the landlord to quantify its loss before issuing proceedings.

What is a schedule of condition?

A photographic and written record of the state of the premises on the day the lease is granted, prepared by a surveyor, agreed by both parties and annexed to the lease. The repairing covenant is then qualified so that the tenant need not put the premises into any better condition than the schedule shows. It is the most effective protection against a claim for disrepair that predates the tenancy, and it needs to be detailed enough to settle an argument about a single window years later.

Can a landlord claim dilapidations during the lease?

Yes, but with restrictions. Section 146 of the Law of Property Act 1925 requires a notice specifying the breach and allowing a reasonable time to remedy it before forfeiture. Where the lease was granted for seven years or more and has at least three years left, the Leasehold Property (Repairs) Act 1938 lets the tenant serve a counter-notice within 28 days, after which the landlord needs the court's leave, given only on grounds such as preventing a substantial fall in the value of the landlord's interest.

Should I do the repairs myself or pay the landlord?

Doing the work is often cheaper, because the landlord's costings include professional fees, contingencies and loss of rent that your own contractor does not charge. Agree the scope with the landlord's surveyor first and obtain written confirmation that the works satisfy the schedule, otherwise the claim returns for items the landlord says were missed. Where the landlord is going to refit or redevelop, a negotiated payment reflecting the section 18 cap may be lower than either.

Sources & further reading

• Landlord and Tenant Act 1927, section 18
• Pre-Action Protocol for claims for damages in relation to the physical state of commercial property at termination of a tenancy (the Dilapidations Protocol)
• Leasehold Property (Repairs) Act 1938
• Law of Property Act 1925, section 146
• RICS Code for leasing business premises, 1st edition
• Landlord and Tenant Act 1954, section 30

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 22 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).