Notional Schedule of Dilapidations

In order to enable consideration of and internal accounting for the possible sum of a landlord's claim for dilapidations, our tenant client sought to notionally assess any breaches of repairing covenant that may have accrued, together with accurate estimation of the sums that might be applicable to the same.

Due Consideration Without Inflation

Ensuing accuracy of output through objective assessment presents an inherent hurdle, owing in part to limited documentation trails and the very nature of cost estimating. The significant over estimation of the extent of itemised repairing covenant breach or the associated costs would, however, reduce the value afforded to the tenant client via the preparation of a notional schedule of dilapidations.  

Foreseeing the Unforeseeable 

In order to prepare an accurate assessment of a tenant's notionally accrued dilapidations liabilities, regard must be had for the repairing covenants detailed in the lease, relative to the condition and configuration of the property, as well as the extent to which the lease might require a tenant to reinstate alterations and / or additions. Where a tenant's works act to benefit a property, however, doubt can often exist as to whether a landlord claimant may seek that such alterations or additions be reinstated or, alternatively, be put into repair and / or redecorated. 

The subject property featured a number of tenant alterations, requiring reinstatement of the same, as directed by the covenants contained within the lease, however, the nature of those alterations were considered likely of benefit to landlord's freehold reversionary interest and those similar such interests of any prospective future occupier.

Seeking to ensure that maximum value was afforded to our tenant client, the notional schedule of dilapidations was prepared on the basis of strict lease repairing covenant interpretation, seeking to objectively identify both the scope of the breaches applicable and the estimated costs applicable to the same.

Inherent Ambiguity

The ability to objectively assess and advise by way of the sought notional schedule of dilapidations was further complicated owing to repairing covenant qualification by reference to the contents of the applicable schedule of condition. The photographic only schedule of condition, omitting to include written qualification commentary, necessitated unbiased interpretation of the image contents, as to account for both a landlord and a tenant interpretation of the same.

The inherent inclusion of subjectivity in the interpretation of all applicable factors, regardless of all efforts to irradiate any such inclusions, was recognised as unreasonable to fully overcome. As a component part of the formulation and delivery of the notional schedule of dilapidations, commentary was provided to our tenant client in order to qualify the approach taken, inclusive of the possibility of a differing perspective being taken by the landlord claimant, should a claim for dilapidations be forthcoming.

Receipt of a landlord's terminal schedule of dilapidations some two calendar months following our notional schedule of dilapidations preparation yielded a disparity of just 8.3%, with tenant's own assessment arriving at the marginally larger sum.

Claim Sum vs Claim Contents

Whilst the monetary sum of a claim acts to serve as a useful tool in assessing the accuracy of any notional assessment, the alleged breaches to which those costs relate are an equally significant factor. Side by side review of the claimant's schedule and the tenant's notional assessment yielded largely aligned remedies, adding further value to the strategic advice provided to our client in consequence of the notional schedule of dilapidations provided.

The preparation of a notional schedule of dilapidations typically acts only as a platform for further input, then enabling the development of a potential liability mitigation strategy through tailored advice and direction, sometimes necessitating the attendance of works or procurement of costs with a view to attending works, if a monetary settlement cannot be reached in good time. As chartered building surveyors specialising in and having a passion for dilapidations matters, our expertise enable us to advise and direct tenants to realise the best possible outcomes in the face of a dilapidations claim, via any one or a combination of actions. The arrival at any given strategy will have regard for a number of factors such as appetite for risk, the availability of time, budgetary constraints, etc, bespoke to the circumstances. Should you wish to discuss any dilapidations related issues you and your business may be dealing with, Node Building Consultancy is ideally placed to assist.