Will a Section 18 Valuation
save me from a large costly
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As we have said before, there are only a few things certain in life and that, apart from death and taxes, dilapidations claims are a certainty yet they always come as a surprise. It no doubt crosses many leaseholders minds when they have had a costly dilapidation served upon them at the end of their lease, is there is cheaper way of getting out of all these costly repairs?
At the end of the lease, known as the lease termination, when the leaseholder/business owner is asked to return the property (yield up) and a dilapidations schedule is served asking for further repairs to be carried out, or improvements on the improvements (as we once heard it described) and enough is enough and there must be a better way of dealing with a dilapidations claim.
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We often come across the situation where the business owner is very keen to move his business forward has taken on business premises leasehold that is in poor condition and carried out repairs and improvements to make it into much better condition (on promises so we are told), etc, from the landlord or the landlord's agents of rent free periods, which never materialise.
Is A Section 18 valuation a way out of a dilapidations claim?
Often when business owners/leaseholders hear about a Section 18 valuation they feel it is the answer to all of their prayers as it, broadly speaking, limits the size of the landlord's claim by what is known as the diminution in value, which is the difference in cost that the dilapidations make to the rentable level of the property.
A Section 18 valuation is really two valuations; that of the market value of the property if it was in a state of repair as set out within the lease, and a value of the property as it is. The difference being the limit on money the landlord can receive, although we have to add that every case is individual and subject to legal interpretation and negotiation.
Explain to me how a Section 18 valuation may work as I have a dilapidations claim against me
When the landlord presents you with a dilapidations claim we would recommend that you first of all need to appoint a surveyor that specialises in dilapidations claims (and we know we are biased being surveyors but it is often the best money you will spend!) to give an overview of your situation and discuss the various options available to you. Most importantly, this does require your input and for you both to ensure (that's yourself and the surveyor) that your end goals are understood and your needs and requirements are understood also. Only with these things in mind can the specialist surveyor advise you correctly.
We would expect advice from a specialist surveyor to include a comment on the quality and validity of the dilapidations claim that has been made, together with the cost implications. This will depend, to some extent, upon the information that you can provide to the specialist dilapidations surveyor. This could include everything from:
An original Schedule of Condition
Any side letters
Any written approvals to alter the property or drawings
Any photographic evidence you have of the condition of the property
And any information you have upon the original condition of the property.
This will, subject to your type of lease, help identify your liability and the associated costs. If the dilapidations costs are large then it may be that a Section 18 valuation may be less than these costs. Expect the surveyor to advise you upon these.
There is an element of risk with a Section 18 valuation (business risk) in that if the landlord does not agree with the figures provided and court action is taken, and the outcome is not in your favour, this will then mean that you will have increased the landlords costs, which in turn will be passed to yourself. Just to spell this out and make it absolutely clear that means that your costs will include not only the dilapidations claim that you didn't originally agree with, but also the costs of your landlord for fighting against your claim and also your own costs for making the claim. To break this down you will also incur:
the landlords costs in making the claim and in fighting against your counter-claim
your costs in assessing the initial claim and making a counter-claim
usually the costs of a specialist valuer
rental costs for the property, if you haven't yielded up within the required time
So a great deal of thought, discussion and tactical knowledge needs to take place before the Section 18 valuation route is taken unless it is a clear cut example. However, we don't believe there is such a thing as a clear cut example as there is always an element or risk.
Can I use a Section 18 valuation to negotiate with?
The simple answer is yes, but this is where the skill of the negotiation takes place, as both parties know that to take the negotiations to court requires a different level of commitment and to those in the negotiation, particularly for the tenant if the case is not clear cut. We would add that, relatively speaking, the Section 18 is a new area of dilapidations and you do need to deal with specialists who have experience in this area.
Please contact us for help and advice with regard to dilapidations, dilaps claims, negotiations, Section 18 valuations, schedules of condition, break clauses, scott schedules, surveys, building surveys, structural reports, engineers reports, specific defects report, structural surveys, home buyers reports or any other property matters on 0800 298 5424 and a surveyor will ring you back to discuss this further. Please note we are independent surveyors.
We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).
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We have produced a number of articles and book reviews on dilapidations, for more information go to: