Dilapidations Settlements – Do’s and don’ts

Where proceedings are issued but the claim reaches a dilapidations settlement beforehand, the lawyers will usually deal with the documentation of the settlement. However, the vast majority of dilaps claims settle without the need for court proceedings and the surveyors document the agreements. The following is a checklist for those situations:

Do set out the parties to the settlement (i.e., the full names of the landlord and tenant), the address of property to which the settlement relates, and the date of the lease.

Do make clear the scope of the settlement. Does it relate: to all outstanding claims under the lease (which could include, for example, rent and service charge arrears; care should be taken not to compromise non-dilaps claims inadvertently); to all claims relating to the state and condition of the premises (most usual); or to specific dilapidations elements only? Does it cover costs? Interest?

Do state that the agreement is “in full and final settlement” of the claim.

Do make clear the steps each party is to take to conclude matters (e.g., payment of an agreed sum into a specified account or to a specified party) and the date by which those steps are to be taken. Consider providing for what is to happen in default (e.g., interest).

Do ensure that it is unequivocal that the terms have been accepted by both parties. Ideally, they should both sign the agreement or have it signed on their behalf.

Do consider taking legal advice if the matter is not straightforward (e.g., there are VAT or other tax implications, the lease is to be surrendered, or there is some other complication).

Don’t head the document “Without Prejudice”. The negotiations should have that heading to avoid prejudicing the client’s claim prior to settlement.

Don’t head the document “Subject to Contract”. Again the negotiations should have that heading to avoid a binding contract or agreement being concluded prematurely.

Don’t forget to consider what may happen post-agreement and provide for this in the settlement. This is especially a consideration where settlement is reached prior to the end of the lease. Provision should be made for what is to happen if fresh disrepairs occur between the settlement date and the lease end date.

Milton McIntosh

Milton is a Consultant Property Litigation Solicitor with Excello Law. Milton deals with all aspects of real estate disputes, including the full range of landlord and tenant matters. Milton has particular expertise in dilapidations, being a former member of the RICS Dilapidations Working Group and involved in the writing of previous editions of the RICS Guidance Note on Dilapidations. Milton advises clients and writes regularly on the area of dilapidations.