This "New Normal"

We hope that this finds you, your family, and your business, healthy in these challenging times.

2020 is a spike year in the UK for expiries and tenant break options in leases of commercial and leisure properties. In this pandemic climate, more of these events are becoming exits, than lease renewals. As such, there is rapidly increasing demand for dilapidations advice from both landlords and tenants.

There are distinct types, or disciplines, of chartered surveyor. Dilapidations are fronted by chartered building surveyors. Their specialism is to identify the extent of disrepair, poor decoration and failure to reinstate alterations, and price fixes. The aggregated cost of all the necessary works, plus fees for managing the contract etc., becomes the amount of the landlord’s ‘claim’, to which might also be added loss of rent etc.

The tenant employs their own chartered building surveyor to negotiate towards settlement.

THIS is where the other - our - key type of chartered surveyor becomes crucial. This is the Valuer, also called a General Practice (GP) surveyor, or a chartered valuation surveyor. Our specialism is the transacting and open market valuation (for rental, or sale) of commercial & leisure properties.

The law dictates that the amount of damages payable in dilapidations claims will be the lower of the Cost of Remedial Works (negotiated between the chartered building surveyors) OR the amount by which the property’s value has been reduced, or diminished, as a consequence.

Usually this is far less (as explained below, and in the body of this website).

Tenants therefore need what is called a Diminution Valuation (DV) by a valuer, to ensure that the Cost of Works settlement negotiated by their chartered building surveyor, even when considerably less than initially claimed by the landlord, is not more than should actually be paid out.

Landlords too often need a DV, either to rebut an opportunistic one presented by a tenant, or as is required by the Dilapidations Protocol 

Welcome to Radius Consulting.

We are the UK’s only specialist firm of Expert Diminution Valuers.

Every landlord and tenant will be concerned with dilapidations matters at some point during, and invariably at the end (break) of, a lease. Most leases make tenants responsible for all repairs, redecorating and to reinstate any alterations they have made. The landlord is entitled to damages for any of these works not done by lease end. The extent and pricing of these works is assessed by a chartered building surveyor, and listed in an Excel document which becomes the Schedule of Dilapidations (Quantified Demand) ‘served’ on the tenant by the landlord’s solicitor. The tenant usually employs their own chartered building surveyor to negotiate to a lower total sum for settlement.

As noted above, whilst dilapidations are usually then settled at the costed repairs figure negotiated between opposing chartered building surveyors, with tenants pleased that it is far less than originally claimed by the landlord, it will probably still be far higher than it should be.

The law provides that landlords should only be compensated for their true loss, which is the lower of the Cost of Remedial Works or the impact on the property’s value. The chartered building surveyors negotiate Cost of Works only; they are not qualified to assess the impact (if any) on the property’s value. This is the unique domain of a totally different discipline of chartered surveyor, being a chartered valuation surveyor (also known as a Valuer, or GP surveyor).

Commonly the impact of disrepair etc. on a property’s value is far less than even the lowest Cost of the Remedial Works negotiated by the tenant’s chartered building surveyor. This differential is caused by a range of factors, including that older buildings are worn and so not required, or expected, to be like new, and that whilst a landlord might not admit it for fear of undermining their dilapidations claim, the property requires modernising and upgrading anyway, which works probably erase (supersede) a lot of what they are claiming for.

Researching and arguing these points to further minimise the dilapidations settlement figure, is the specialism of the chartered valuation surveyor (Valuer).

A tenant settling a dilapidations claim without this Diminution Valuation (DV) advice by a Valuer is more likely than not to be paying too much.

As detailed and explained at Damages Cap, the law which minimises dilapidations payments to the lower of the Cost of the Remedial Works or the impact on the property’s value is, in England & Wales, provided by Section 18 (1) of the Landlord & Tenant Act 1927. Similar statute applies in Ireland, whereas a relatively weaker (but still very worthwhile) measure of ‘alternative loss’ applies at common law in Scotland.

Whilst this may all seem very tenant focused, landlords require DV advice too.

Landlords require DVs in situations including:

  1. To rebut an opportunistic DV presented by a tenant;

  2. If not (yet) doing the Remedial Works, for whatever reason, then a DV must be provided to support and evidence any dilapidations claim (this required by paragraph 9.4 of the ‘ Dilapidations Protocol ’).
We aim to shed more light on what is sometimes termed the ‘dark art’ of DVs in this website. We are consistently reviewing and updating, with the aim of improving understanding and access. If you have the time, the Articles and Case Studies will all inform, with Dilapps - our App available for free at both App Stores - providing a quick, user friendly tool to assist in appreciating the likely benefit a DV would have in your own case.



Paul J Raeburn BSc (Hons) MRICS DipArb FCIArb 
RICS Accredited Mediator
 
Neil Burridge BSc (Hons) MRICS ACIArb
RICS Registered Valuer

Chartered Institute of Arbitrators

CIArb exists for the global promotion, facilitation and development of all forms of private dispute resolution around the world to maximise the contribution that dispute resolution practitioners make.

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