In January 2012, the Civil Procedure Rules adopted the pre-action protocol for dilapidations.
The protocol sets out conduct that the court would normally expect prior to the commencement of a claim for damages for dilapidations against tenants of commercial premises (once the lease has expired).
The aim of the protocol is to encourage early settlement, avoid unnecessary litigation, and set a process for the parties to follow. The principles contained in the schedule are given weight by the fact that a court may impose sanctions on a party who has failed to comply 'in substance with the relevant principles and requirements.'
- landlord to send the schedule and quantified demand (normally within 56 days after the termination of the tenancy)
- tenant responds within 56 days of receiving the quantified demand and schedule
- negotiations/alternative dispute resolution to take place
- quantification of loss
- stock take
- court proceedings
When should you serve and when should you respond to a schedule?
Generally, a landlord should be looking to serve a schedule of dilapidation within 56 days after the termination of the tenancy. If the landlord wants to send a schedule prior to the termination date then, once the lease has come to an end, the landlord must either confirm that the situation remains as stated in the schedule already served or send a further schedule.
Likewise, a tenant should normally respond within a reasonable time and aim to respond using the landlord's schedule as the starting point for his comments. Again, as a general guide, a response within 56 days is usually appropriate.
The schedule should also be endorsed by the landlord's surveyor and be signed and dated by him. The endorsement should confirm that in the landlord's surveyor's opinion:
- the works are reasonably required to remedy the breaches of the tenant's lease covenants
- full account has been taken of the landlord's intentions for the property
- the costs identified to repair the property are reasonable
The introduction of an endorsement aims to produce a 'cards on the table' approach so that the tenant can readily ascertain the landlord's intentions for the property.
However, sometimes a landlord may be unsure when the Schedule is served, what its intentions are for the premises. If this is the case, then care should be taken by the landlord when creating correspondence which might evidence an intention at the point of lease expiry to redevelop the property (even if the landlord then abandons these plans), as such documents will have to be produced at the disclosure stage of the litigation and could open up a line of defence to the claim.
The effect of not including such an endorsement is that the landlord is then unable to demand a response from the tenant within 56 days.
Similar to the landlord's endorsement, the tenant is now also required to provide an endorsement by it's surveyor. The tenant's surveyor should confirm that in his opinion:
- the works detailed in the response are all that were reasonably required
- account has been taken for what the tenant reasonably believes to be the landlord's intentions
- any costs set out in the response are reasonably payable for such works
What is a quantified demand?
A quantified demand is essentially the monetary sum sought as damages in respect of the breaches of the lease for the property (as detailed in the schedule), together with any other items of loss for which damages are sought. It should also normally be served on the tenant within 56 days after the termination of the lease.
The quantified demand should also confirm that the landlord will attend a meeting with the tenant to discuss the contents of the schedule and demand. If the monetary sum sought is based on the cost of works, it should be substantiated by invoices or detailed estimates.
Shoosmiths has extensive experience in dealing with service of Schedules of Dilapidations and responses. We also regularly advise and act for clients in dilapidations proceedings, as claimant and defendant. If you would like to discuss any issues relating to dilapidations, please contact Wayne Nash by emailing [email protected] or any member of the Property Litigation team.