Taking a Walk on the Wilde Side

It’s Radius’ 18th birthday – coming of age.

At the time, it did seem a bit odd establishing a standalone consultancy specialising in Section 18/Diminution Valuations (DV’s). The impetus was my inherent aversion to opportunism. My career to that point primarily in retail agency and lease consultancy on both sides of the fence, had taught me that all too often, dilapidations settlements between building surveyors for a sum of money that was meant to then be spent on remedying breaches, was not. Instead, as is still too often the case, the property would be re-let with no works done, or sold (at much the same price I would have expected if the money had been spent on it). Or works would be done, but often spending some or all of the ill-gotten gains on alterations and upgrades.

Then came the September 2008 crash. In its aftermath, our business boomed, as CFO’s quickly came to appreciate the merits of DV’s (along with FRS 102) in minimising their dilapidations exposure. Lease lengths shortened too (from the previous 25 year norm, to an average of less than 10 years), hence increasing the number of terminal dilapidations events.

In 2012, the Dilapidations Protocol was adopted into the CPR.

This includes the requirement that landlords who are not (as yet) doing most to all of the claimed remedial works, must provide a DV to evidence their damages claim, rather than seeking to rely on the cost of works not done. This does of course effectively codify a very valuable protection for tenants.
It also taught us that sometimes tenants can be opportunistic too, arguing nil to nominal diminution in value without any real valuation (open market) substance. So DV’s can, perhaps oxymoronically, be of real benefit to landlords too.

The simple fact is that “cost” and “value” are not one and the same thing. Yet the terms are often carelessly transposed. It is thus not surprising that in 18 years of operation, providing expert DV advice in over 4000 dilapidations cases involving the broadest range of commercial, leisure and specialist properties across the UK and ROI, the conclusions have all but consistently shown us that the impact on value, has been notably less than the negotiated costed sum to remedy the breaches.

In that time, we take credit for evolving the historically overly-academic (“two valuation”) approach to DV’s to what the learned KC Guy Fetherstonhaugh commends as the “pared-back” approach. That is, the aggregate of the costed remedies surviving the two “filters” of removing items Not Value Affective, and also items which the valuer considers more likely to be superseded by the salient Hypothetical Purchaser’s actions (per the First Limb of Section 18), as opposed to what the actual landlord might conveniently state as its intentions.

We have also been committed to promoting ADR over court, noting that fewer than 1% of dilapidations cases make trial these days, whilst over 90% settle at mediation.

Proud as we are of our achievements and positive contributions to the fair resolution of commercial & leisure property dilapidations claims across the UK and ROI, it still never ceases to amaze us how many “big” tenants (retailers especially) settle without first checking with a specialist valuer if a DV will likely secure lower. Empirically, our 18 years history shows that DV’s tend to resolution at an average 37.25% less than would otherwise have resulted on a pure cost of works basis. So in cash terms, an average £150,000 less. So saving the DV fee cannot be the reason to not get a DV. Perhaps then it is simply a lack of understanding of what it is likely to achieve. Building surveyors are relied upon to explain the relevance of DV’s, but of course valuation is not their field. That is for the valuer. 

Hence why we went on to uniquely provide both disciplines working together from the outset in Dilapsolutions. No communication breakdown, plus economy of scale of fees. Win, win.
Our original Radius website used a somewhat tongue-in-cheek quote from Oscar Wilde:

 “A cynic is a man who knows the price of everything and the value of nothing”.

Keeping the family interest in dilapidations alive, I think it was then his great granddaughter, Kim, who sang about “looking out a dirty old window”.

Onwards and upwards.