Dilaps – A Good Place to Start

Based upon the College of Estate Management CPD Pack

  By Malcolm Hollis  

First Published 1992

Second Published 1999 with a 2006 Addendum

Overview

A warning, this document is out of date, but at approximately 60 A4 pages offers an excellent beginner's introduction to the world of dilapidations and even sets out the aims and objectives right at the start.

Whilst we believe this is aimed at the surveyor we feel it will be of use to anyone involved in the dilapidations process.

Format

Malcolm Hollis says at the start of the booklet that there is perhaps more law in it that you would expect from a surveyor but he adds that understanding / interpreting the law enables the surveyor to use his knowledge. The law cases referred to very much summarise and form part of the explanation rather than, as we have found in some dilapidation books, they are taken in isolation.

Readability

Very readable. This is a booklet that you could read almost in one sitting, although it may take a second, third or fourth reading to fully appreciate.

Chapters

Chapter 1: The Introduction

Chapter 2: The Statutory Controls

Chapter 3: The Contractual Controls

Chapter 4: Common Law Controls

Chapter 5: Repair

Chapter 6: Reporting

Chapter 7: The Claim

Chapter 8: Fixtures and Fittings

Chapter 9: The Conclusion

Chapter 10: Appendices of the Cases

2006 Addendum

Sample

We would refer you to reading Chapter 3 if nothing else.

Rather than take a sample chapter we have looked at all the chapters briefly.

Chapter 1: The Introduction

Interestingly Malcolm Hollis states that a dilapidation's investigation should be more detailed than a survey and he uses seven bullet points as to what a dilapidations should be. We would be interested to hear your comments with regard to one of the bullet points that we both agree and disagree with, which states that dilapidations should establish the presence of a defect (which we agree with) and identify the appropriate method of repair (which we would disagree with); this we would argue is for the tenant to decide.

Malcolm Hollis also uses his bullet point system, four bullet points in this case, with regard to interpretation of the lease covenants and another four bullet points for liabilities that the tenant may have.

There is also a section of ‘exclusions', which we have not come across in our previous readings on dilapidations.

Chapter 2: Statutory Control

This chapter looks at:

The Law of Property Act 1925 and the famous Section 146 (1)

The Landlord and Tenant Act 1927 and the famous Section 18 (1) Valuation

The Leasehold Property (Repairs) Act 1938, which was brought in to resolve abuse of the 1925 and 1927 Act

The Landlord and Tenant Act 1954 and subsequent Landlord and Tenant Amendment

Malcolm Hollis comments on each of these statutes and gives a history of how the law has developed and rightly and interestingly comments upon tenants improvements that the tenants always think are improvements and the landlords always believe are not improvements, and the negotiations begin!

Chapter 3: Contractual Controls

This is written from the leasehold draftsman's perspective and explains the problems that we have with many leasehold agreements; the leasehold draftsmen simply do not see the property or visit it and it gives a very good selection of examples of problems that can be caused by not seeing the property. We would add that this is of course the advantage that surveyors always have over the leasehold draftsman, as they not only bring to bear their knowledge of property but they have also seen the property!

There are also comments upon the various sections seen within a typical leasehold document:

• Terms
• Rent
• Decoration
• Compliance with Statute
• Fees
• Reinstatement of Alterations

Schedule of Condition

Malcolm Hollis also refers to the ability that a tenant has to limit their liability by referring to a Schedule of Condition. We would give a round of applause to this as it can be such an easy step for a tenant to have a Schedule of Condition carried out.

Repairing Covenants

Malcolm Hollis defines ‘leave', ‘putting keep' and other phrases that are found such as ‘fair wear and tear', ‘tenantability', ‘wind and watertight' etc.

There is also an interesting section on Implied Obligations, Break Clauses and Right of Entry. For us this is the most interesting chapter.

Chapter Four – Common Law Control

This Chapter can really be summed up with a statement that ‘English language is open to interpretation,' even though case law helps us to interpret the English language it is very much case specific, though many general issues are being resolved.

Information Required

Information Required has seven bullet points and we would make the comment that often this information is not received from the client that is insisted upon.

Chapter Five – Repair

This Chapter looks at the difference between ‘repairs', ‘blemishes' and ‘defects' and discusses cases related to a property being free from accelerated deterioration:

Lister v Lane Nesham 1893

Calthorpe v McOscar 1924

Halliard Property Company v Nicholas Clark Investment Limited 1984, which looks at the standard of repair

Lurcott v Wakeley and Wheeler 1911

Merry v Birmingham City Council 1987

Pembury v Lamdin 1940

Elmcroft Development Limited v Tankersley Sawyer 1984

The Post Office v Aquarius Properties Limited 1987

All of which look at the definition of ‘repair' or ‘renewal'.

Investigation

Interestingly, responsibility for the cost of any investigations required to determine the extent of disrepair lies with the party making the claim, which is usually the landlord and gives a very interesting example of the Plough Investments case.

Chapter 6 – Reporting

This chapter defines the Schedule of Dilapidations as the concise description of the work the landlord contends the tenant is obliged to carry out under the terms of the covenants in the lease. It then gives an example which has been superseded now, but which gives the main elements of what should be covered; if you look elsewhere on this website you will see the current format and thinking on this.

Chapter 7 – The Claim

The Claim looks at landlord's interpretation (which of course is what this is all about).

Repair cost (which is why everyone interprets the phrases differently).

Fees, it advises that claims may include fees under three sections:

1. For preparation
2. Supervision
3. Fee for negotiating the settlement of the claim

It then goes on to look at Value Added Tax, rent, sundry items and interest, as in what interest can be charged on the amount owed.

Limitations of the claim refers to The Landlord and Tenant Act 1927 Section 18 (1), which says no claim shall exceed the amount by which the value of the reversion in the premises is diminished due to the breaches, which means, as we understand it, that the loss to the landlord will never be greater than the loss in value of the premises; the value being the difference between what the tenant is trying to give him back and what the property would be worth if kept in an average state of repair.

Malcolm Hollis looks at the process for dealing with this in a two stage valuation process. The first valuation is calculated on the assumption that the lease covenants have been complied with (this is not the value of a first class building or a brand new building). The second valuation is the market value of the landlord's interests in the building.

Chapter 8 – Fixtures and Fittings

Landlord's Fixtures and Fittings

This section looks at what are landlord's fixtures and fittings and refers to the New Zealand Government Corporation v HM & S 1982, Leigh v Taylor 1902 and also gives examples of landlord's fixtures and fittings, which is good.

Tenant's Fixtures and Fittings

Again, this is explained well with examples given.

Chapter 9 – Conclusion

This summarises very nicely the Schedule of Dilapidations. It states:

1. To locate a disrepair
2. To identify the breach of a covenant of the lease or license
3. To set down the type of work required by the landlord to eliminate the disrepair, the extent of the work and where relevant the probable cost to the landlord of carrying out the repairs (we would agree and partly disagree with this statement)

For a Tenant to have a Liability there must be …

Malcolm Hollis looks at seven key points. These are worth noting:

1. The breach of the covenant in the lease or the licence
2. Damage caused by the breach
3. An existing disrepair
4. A failure to maintain the building to a standard expected by a reasonably minded tenant at the start of the term
5. A defect within the demise
6. Not excessive costs of repair when compared to the freehold value of the building
7. The building once repaired must not be wholly different from that which was demised at the start of the term.

Chapter 10 – Appendices of the Cases

This has various case law summarised into a paragraph set out nicely under headings of:

Damages Landlords Breach

Damages Tenants Breach

Demise - determine the extent

Diminution

Forfeiture

Unlikely to obtain

Holding over

Inherent Defect

Liability of the original tenant

Repairing – the meaning of

Repair quality at the end of the lease

Repair or renewal

Damp proof course

This is a great chapter and is very much written how the surveyor thinks.

2006 Addendum

There has been an addendum to this booklet which updates several of the sections, including the introduction of the Law Reform Sub Committee of the Property Litigation Association's Protocols. It also gives a worked example of a Section 18 Valuation, which is worth seeing.

Review upon Reflection

This should be recommended reading.