Dilapidations: resolving disputes quickly

Out of court

30 June 2017

Martin Burns explains why it is important to resolve dilapidations disputes quickly, cheaply … and early

The ultimate venue for the resolution of a dilapidations dispute is a court of law, but the litigation process is not without pain. It costs money to go to court – perhaps more than the amount in dispute.

Litigation is a lengthy and tiresome process. The result is almost always unpredictable, and the landlord and tenant will undoubtedly forfeit control of the process at some point to lawyers and the judge.

Typical phases of a dilapidations dispute can be as follows.

  • At the end of a tenancy or lease, a landlord considers that the property has fallen into decay. It is in such a state of disrepair that the landlord wants to compel the tenant to pay for the cost of restoring it.
  • The landlord prepares a schedule of dilapidations. This document, inter alia, itemises the areas of alleged disrepair, recommends specific remedial works and includes estimates of the costs for these.
  • The tenant questions some or all of the alleged dilapidations or the amount of the costs that the landlord has estimated for repairs.

Alternatives to litigation

What alternatives to litigation would enable landlords and tenants to find quicker and cheaper solutions to their dilapidations problems, and help them retain influence over the outcomes?

The earlier and quicker a disagreement is addressed, the more likely the result will be better for both parties. Most surveyors working in this area will be aware of legal obligations under the Dilapidations Pre-action Protocol. This procedural law codifies requirements for parties considering legal action to communicate with each other openly and transparently, to try to resolve their differences without the need for the courts to intervene, and to explore and use alternative dispute resolution (ADR).

In 2014, following work by the RICS Dilapidations ADR Working Party, which comprised surveyors and lawyers experienced in property and dilapidations, RICS launched an ADR service to resolve dilapidations disputes that would otherwise be going to court. The service has been built around a process known as independent expert determination.

The expert determination service is well structured, is relatively quick and costs significantly less that litigation. It enables parties to opt for a decision by someone who has immense subject matter expertise and is highly experienced in dilapidations matters, rather than by a judge, who knows a lot about the law but perhaps less about property matters.

The parties are also able to decide the timetable and agenda for the process. They can make submissions to the expert, who will fully understand technical issues that may otherwise need to be explained to a judge. The process results in a binding decision, which will negate the need for further legal action.

While the number of dilapidations claims is reportedly on the rise, there are still very few cases where landlords decide it is worth pursuing matters through the courts. RICS’ expert determination service is a viable and cost-effective alternative to resolve disputes that would otherwise be destined for litigation.

Litigation is a lengthy and tiresome process – the result is almost always unpredictable, and the landlord and tenant will certainly forfeit control of the process

If only a small number of disputes are heading to court, it follows that expert determination as an alternative to litigation is likely to be used sparingly. Still, it remains a viable and worthwhile option for parties who are involved in medium- to high-value disputes, or for those contemplating legal proceedings.

Small claims settlements

But what about the untold number of lower-value claims? Many such claims come across the desks of specialist chartered surveyors who routinely handle dilapidations matters, and will never end up in court – or expert determination – because it would not be cost-effective to do so, or there is little or no appetite on the part of the landlord to go down that particular route. There should perhaps be a way for parties to resolve such issues cheaply and quickly too.

For this reason, the working party is currently scoping an additional ADR service that parties can use to provide prompt and inexpensive resolution. This service will offer early analyses of claims and support parties by enabling useful and open conversations about possible solutions. It will offer fully reasoned recommendations by an impartial expert in the subject matter, to achieve sensible and mutually acceptable settlements.

Martin Burns is RICS Head of ADR Research and Development

Further information