Updated: Oct 8, 2019
Given the financial stresses on the property market in recent years, which were further amplified as industry leading lenders tightened their belts after the recession, landlord's have been seeking to get their pound of flesh elsewhere, while tenant's have become more cost conscious. As a result of the more commercially conscious property managers, landlords and tenants we have seen a lot more dilapidations claims heading to court. One of the most notable areas of dispute is Section 18(1) valuations. These valuations have a tendency to lack impartiality, given that the instructing client wants the valuation to be shown in their favour. Time and time again judges have had to disregard these 'expert' views and make their own call based on the evidence provided.
Before proceeding to court the two building surveyors (assuming both the landlord and tenant employ respective surveyors) have a task, which is to try and agree a scope of claim and negotiate an appropriate settlement. This is to keep unwarranted claims or disputes from wasting the court's time and from wracking up costs on either side.
Historically, landlords have had a bad rap for making spurious claims in a manner which entitles them to a 'lease end bonus'. The intention behind these claims is to take advantage of the tenant's dilapidations provision in order to obtain the maximum financial settlement and undertake minimal works (if any) to relet the property.
These are not the actions of the commercially minded or proactive landlord. If the property is relet with a schedule of condition, the landlord potentially faces the property being handed back in the same condition at the next lease end and will need to spend that money plus inflation on materials and labour which accrued over the following tenancy. Not shrewd.
The property could also remain vacant for an extended period as a result of its condition and the little short term 'profit' the landlord gained from the dilapidations claim has ended up costing them far more in loss of rent, rates, insurance, interest etc.
This practice of impropriety seemingly spurred an aggressive response from tenants, who now have a propensity to dispute significant proportions of dilapidations claim or the claim in its entirety. This is done by requesting that the landlord substantiate their claim, as required under the Pre-action protocol for dilapidations.
In pursuing this detailed substantiation, there is an intent on the tenant's part to neglect the claim and seek to exaggerate the landlord's requirements under the pre-action protocol, creating more work for the surveyors and lengthier disputes. There is a tendency to get lost in the bureaucracy and forget that this is a claim for a breach of contract.
Furthermore, requesting a S18(1) valuation at the early stages of a claim, as a matter of course, will add significant cost, time and complexity to the claim. Not to mention, that the other side will likely require their own 'impartial' valuation as well. The building surveyors should have enough about them to assess the age, character and locality of the property and what elements should be considered beyond reason for this market.
What once used to be a brief exchange and a handshake has seemingly become an increasingly 'complex' area of surveying.
The key to being a successful dilapdiations negotiator is to be able to try and view matters impartially. This way you can try and determine what sort of outcome would be achieved in court and manage your client's expectations accordingly.