How the diminution is measured
Two valuations of the landlord's interest at lease end: one in the condition the premises should have been in had the covenants been performed, one in their actual condition. The difference is the cap. Where a purchaser would not discount for the disrepair — because the incoming occupier would strip out anyway — the diminution can be far less than the cost of works, and sometimes nil.
Supersession
Where the landlord's own works supersede the tenant's repairing obligations — a full refurbishment, a change of use, a reconfiguration — those items drop out of the claim. Establishing the landlord's actual intentions, through marketing evidence, planning applications and contractor instructions, is often the single most valuable piece of work on a dilapidations file.
When to run the argument
A Section 18 valuation is worth commissioning where the claim is substantial, where the building is dated or the location weak, or where there is any sign of redevelopment. It is not needed on every schedule, and I will say when it is not.
Common questions
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Chris McGarrigle MRICS, chartered since 1989, acting for occupiers across England, Scotland, Northern Ireland and Ireland.
chris@mcgarrigle.comRelated guides
- Commercial Dilapidations SurveyorDilapidations claims challenged and settled for tenants: interim and terminal schedules, Section 18 cap, diminution valuation and Protocol compliance.
- Commercial Property Expert WitnessExpert witness on commercial property: rent, lease renewal, dilapidations and compensation. MRICS, MCIArb, senior lecturer and MSc Real Estate course leader.
- Commercial Lease ExpiryWhat to do before a commercial lease expires: renewal rights, break notices, dilapidations exposure, reinstatement and exit planning.
- Schedule of DilapidationsWhat a schedule of dilapidations is, interim vs terminal schedules, the Dilapidations Protocol, and how tenants cut an inflated claim down to its real cost.