Valuation in dilapidations
Most commercial leases require the tenant to:
- carry out repairs;
- decorate the premises;
- conform to statutory requirements; and
- reinstate any alterations the tenant made during the tenancy.
At the end of the tenancy, if the tenant doesn’t do some or all of this, the landlord can require payment to do it. An obvious measure of the amount of money due is the cost of doing the work. However:
1. If the work in question can fairly be called “repair”, section 18(1) of the Landlord and Tenant Act 1927 says the landlord can only recover the “diminution in the value of the reversion” – meaning (in a simple case) the loss in value of the freehold resulting from the tenant’s failure to do these things.
2. If the work the tenant failed to do could not fairly be called “repair”, then the payment the landlord is entitled to is the loss involved. Usually, that also amounts to the loss in value of the property, although strictly it can be a rather broader loss than that.
We specialise in this type of valuation – assessing loss in value. We work for either landlords or tenants, because the principles are the same for both. What we have to do is work out A) what the property would have been worth if all the things the tenant “covenanted” (meaning effectively promised or contracted) to do had been done; and B) what it was in fact worth when the tenancy came to an end. The loss in value is the difference between these two values, A and B.