As tenants reposition their retail strategies, downsize or relocate offices, dilapidations are once again moving sharply up the agenda for landlords and asset managers.
At lease end, dilapidations claims can become a strategic and financial sticking point – particularly when tenants challenge claims under Section 18 of the Landlord and Tenant Act 1927. Even where breaches are clear, recoverable costs can be limited. Without the right strategy and evidence, landlords risk seeing claims significantly reduced.
Here, we explore key considerations around cost recovery, Section 18 disputes, and the lessons landlords can learn from case law such as Peachside Ltd v Lee & Keung (2001).
Why It Matters Now: Changing Occupier Strategies
Across the UK, retailers are repositioning store portfolios, sometimes relocating or closing units as consumer behaviour shifts. Some office occupiers are also consolidating, downsizing or entirely vacating larger premises in favour of smaller, more flexible spaces.
Each of these changes has dilapidations consequences, and with greater financial pressures on tenants, more claims are being disputed. Strategic preparation has never been more important.
Cost Recovery: It’s About Real Loss, Not Just the Cost of Works
Landlords are entitled to recover losses where tenants have failed to comply with their repairing obligations. But crucially, dilapidations claims must reflect actual financial loss — not simply a bill for remedial works.
Courts assess:
- What’s reasonable and necessary to restore the property, based on market expectations
- The landlord’s intentions for the property post-lease (e.g. refurbishment, redevelopment)
- Whether loss of rent or service charge can be evidenced clearly and fairly
If a landlord plans to redevelop, refurbish, or leave a property vacant, recoverable sums may be limited.
Section 18(1): How Tenants Can Limit Claims & A Key Case You Should Know
When it comes to dilapidations, Section 18(1) of the Landlord and Tenant Act 1927 is the go-to defence for tenants aiming to cap their liability. It restricts recoverable damages to the actual reduction in the property’s value caused by disrepair—not simply the full cost of the works.
This becomes especially relevant when:
• The landlord plans major redevelopment
• The disrepair has little impact on the property’s market value
• The repair works aren’t essential to re-let or sell the premises
A useful example of how Section 18(1) can be applied is Peachside Ltd v Lee & Keung (2001). In this case, the court found that the cost of repairs significantly exceeded the property’s actual loss in value. As a result, the tenant’s liability was substantially reduced. It’s a reminder that landlords must evidence genuine financial loss, not just present a schedule of costs to succeed in a full claim.
Landlord vs Tenant: Where Disputes Typically Arise
Dilapidations claims can become contentious when tenants look for ways to limit or resist liability. Some of the most common areas of dispute include:
- Pre-existing plans: Tenants may argue that the landlord intended to carry out refurbishment, redevelopment, or alterations anyway, regardless of any disrepair. This can undermine the landlord’s ability to claim the full cost of repairs
- Section 18 valuations: Tenants frequently commission their own valuations to demonstrate that the reduction in the property’s value caused by disrepair is far less than the landlord’s claimed cost of works. If a Section 18 valuation shows limited or no diminution in value, the landlord’s recoverable amount could be significantly reduced
- Unclear or inconsistent intentions: If a landlord’s plans for the property after lease expiry are not clearly documented, or if they change course (for example, opting for major redevelopment), it becomes easier for tenants to challenge the scope and validity of the dilapidations claim
Because of these challenges, strategic planning at lease end is essential. Landlords must be ready to clearly evidence their intentions for the property and demonstrate real financial loss. Gathering robust valuation and expert evidence early on greatly improves the chances of maximising cost recovery and avoiding lengthy disputes.
Here Are Our 5 Key Takeaways for Landlords and Asset Managers:
If you’re preparing for a lease end, here’s what you need to keep in mind:
- Claims must reflect actual recoverable loss — not just a schedule of theoretical repair costs
- Section 18(1) can significantly cap claims where the loss of value is low, so it’s vital to be prepared
- Detailed valuation evidence can make or break your case — the stronger your evidence, the better your chances
- Early planning, even before the lease expiry, helps you build a stronger, more defensible position
- Make sure your post-lease intentions are clear, consistent, and fully aligned with your dilapidation strategy
How PRE Chartered Surveyors Can Support You
If you’re facing a lease expiry, dilapidations claim, or just want to stay ahead of the curve, we’re here to help.
We work closely with landlords and asset managers across the commercial sector, delivering strategic dilapidations advice, detailed due diligence, and robust valuation evidence to help protect your position.
With 15 years’ experience advising on complex dilapidations disputes, our team is trusted to help clients achieve stronger, fairer outcomes and avoid costly, time-consuming disagreements.
