The Vital Role of a Valuer for Diminution Valuations

When it comes to dilapidations negotiations, building surveyors play a crucial role, whether they are preparing the claim for landlords or defending against claims for tenants. They are responsible for identifying damages for failure to carry out repairs, redecorations, and reinstatement alterations and pricing their remedy. Additionally, chartered surveyors specialising in valuation, especially in "Section 18/Diminution in Value" (DV), also play a vital role. This caps dilapidations damages to the lower of the negotiated cost of works figure or the impact on the property's open market value.

The Dilapidations Protocol specifies that landlords must provide a DV if they are not yet doing most or all of the claimed works. This requirement is a protective measure since the effect of dilapidations on a property's value is usually less than the cost of works. Once dilapidations are settled, landlords often consider different works to repurpose or modernise the property.

Many tenants settle a dilapidations claim without requesting a diminution valuation, which is surprising. For landlords, a strong and persuasive DV is essential to counter an opportunistic one from a tenant. On the other hand, tenants have the right to provide their own DV, which often leads to lower settlements than those achieved by a building surveyor alone.

The role of the valuer goes beyond just providing a valuation. They act as a second set of eyes and often identify incorrect claimed reinstatements, which can make up a significant portion of a claim, especially for offices. It's important to consider whether the claimed reinstatement is valid and whether there is a legal obligation to reinstate the alterations. The starting point is what was physically demised at the time of the lease. Unless the landlord can provide clear evidence of an obligation to reinstate alterations, there is no such obligation.

Considering these elements and the specialist valuer's DV impact, it becomes evident that the "saving" relative to settling via a building surveyor alone on a pure cost-of-works basis is significant.

We help landlords & tenants in dilapidations disputes by providing expert diminution valuation advice. Please email paul@radius-consulting.com for more information and assistance.