Schedule of Dilapidations: Commercial Lease Guide (England & Wales)

At a glance

• What it is: a surveyor-prepared list of alleged breaches of a tenant's repairing, decorating, and reinstatement obligations under a commercial lease, usually costed as a claim for damages.
• Three types: interim (served mid-term), terminal (served near lease expiry), and final (served after the lease has ended, usually with a Quantified Demand).
• The damages cap: section 18(1) of the Landlord and Tenant Act 1927 caps recoverable damages at the diminution in value of the landlord's reversion — and can eliminate the claim entirely if the property was going to be demolished or substantially altered.
• Mid-term protection: the Leasehold Property (Repairs) Act 1938 requires a landlord to get the court's leave before suing or forfeiting for disrepair during the term, where the lease was granted for 7+ years and 3+ years remain unexpired — but only if the tenant serves a counter-notice within 28 days of the section 146 notice.
• The process: terminal and final claims are governed by the Dilapidations Protocol, which expects a schedule (and normally a Quantified Demand) within a reasonable time of termination, a tenant response addressing each item — typically as a Scott Schedule — and an attempt to negotiate before court proceedings.
• What limits your exposure: the exact wording of the repairing covenant, any schedule of condition annexed to the lease, and whether the works claimed genuinely fall within what the lease requires.

What is a Schedule of Dilapidations?

A Schedule of Dilapidations is a document prepared on behalf of a landlord that itemises breaches of a tenant's repairing, decorating, and reinstatement obligations in a commercial lease. It is usually drafted by a chartered building surveyor and cross-references each alleged defect against the specific clause of the lease said to have been breached, describing the nature of the breach and the remedial work required to put it right.

Depending on timing, the schedule may also include a costed valuation of those works — an estimate of what it would cost a builder to carry them out. That costed figure is often the starting point for negotiation, but it is not automatically what the landlord can recover: as explained below, a separate legal cap applies to the damages actually payable.

The three types of dilapidations schedule

The type of schedule you have received changes both the urgency of your response and the law that applies to it.

Interim schedule

Served during the lease term, usually where the landlord wants breaches remedied before they worsen or before they affect neighbouring occupiers. Because the tenant still holds the lease and the property has not been handed back, an interim schedule engages the Leasehold Property (Repairs) Act 1938 where the lease qualifies (see below) — this is the one scenario where a landlord may need the court's permission before pursuing the claim at all.

Terminal schedule

Served towards the end of the lease, often a few months before the expiry or break date. A terminal schedule is a signal that the landlord is preparing a claim and gives the tenant a window to carry out works before handing back the keys, or to start negotiating a financial settlement in place of works.

Final schedule (Quantified Demand)

Served after the lease has ended, when the tenant is no longer in a position to carry out the works themselves. A final schedule is usually accompanied by a Quantified Demand — a document setting out the total sum claimed, broken down by item, together with any additional losses such as loss of rent while the property was unlettable for repair. This is the schedule most likely to lead directly to court proceedings if it cannot be negotiated.

The Dilapidations Protocol: the process both sides are expected to follow

Terminal and final dilapidations claims in England and Wales are governed by the Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy — universally known as the Dilapidations Protocol. It has applied since 1 January 2012 and sets out the conduct the court expects from both landlord and tenant before any claim reaches litigation.

The Protocol's stated objectives are to encourage early and full exchange of information, to help the parties settle before proceedings are issued, and — where litigation cannot be avoided — to keep the issues in dispute as narrow as possible by that point.

In practice, the timeline generally runs as follows:

1. The schedule and Quantified Demand. The landlord should serve the Schedule of Dilapidations, and normally the Quantified Demand, within a reasonable time of the tenancy ending — the Protocol treats 56 days after termination as the benchmark for "reasonable" in straightforward cases.
2. The tenant's response. The tenant then has a further 56 days to respond, addressing each item the landlord has claimed. The Protocol expects this in a side-by-side format — commonly called a Scott Schedule — with a column for the landlord's claim and a column for the tenant's comments on liability and cost.
3. A without-prejudice meeting. The parties are expected to meet, in person or remotely, within about 28 days of the tenant's response, to try to narrow or resolve the dispute before anyone incurs the cost of proceedings.
4. Proceedings, if unavoidable. If no settlement is reached, either party can issue a claim. The court can take a failure to comply with the Protocol into account when deciding who pays the legal costs, under CPR 44.2(5)(a) — a cost sanction that applies regardless of who ultimately wins on the substance of the claim.

The Protocol does not itself create new legal rights; it governs how an existing claim under the lease and the 1927 Act should be conducted before it reaches court.

The section 18 cap: how much a landlord can actually recover

Even where a tenant is clearly in breach of the repairing covenant, section 18(1) of the Landlord and Tenant Act 1927 limits what the landlord can recover in damages. It does this in two separate ways, often referred to as the "two limbs."

The first limb: diminution in the value of the reversion

Damages for breach of a repairing covenant cannot exceed the amount by which the disrepair has reduced the value of the landlord's reversionary interest in the property. This is a valuation exercise, not simply the cost of the works: it compares what the property is worth in its actual (disrepaired) state against what it would be worth if it had been kept in the condition the lease required. If the market would pay much the same for the property whether or not the repairs were done — for example, because a buyer would refurbish it regardless — the diminution in value, and therefore the damages, can be far lower than the costed schedule suggests.

The second limb: demolition or structural alteration ("supersession")

The second limb goes further. If the tenant (or, in practice, the landlord resisting the claim would need to establish this against their own client's stated intentions, or the tenant establishes it independently) can show that the property was going to be demolished, or so substantially altered, at or shortly after the end of the tenancy that the repairs would have been rendered valueless, no damages are recoverable for those items at all — irrespective of what the costed schedule says. This is sometimes called "supersession," because the landlord's redevelopment plans supersede any claim based on disrepair. The burden of proving this lies with whoever is relying on it, and it typically requires evidence of a firm, pre-existing intention to redevelop, not merely a possibility under consideration.

Worked example: the section 18 cap in practice

A landlord's surveyor prepares a terminal schedule for a unit on a 15-year lease that is ending, costing repairs at £85,000, covering roof repairs, redecoration, and reinstatement of tenant alterations. The tenant instructs its own surveyor, who obtains a valuation showing that, in its current disrepaired state, the property is worth £410,000 on the open market, and that if fully repaired in line with the lease it would be worth £430,000. The diminution in value is £20,000 — significantly less than the £85,000 costed schedule. Under the first limb of section 18(1), the landlord's damages claim is capped at £20,000, even though the actual repair cost would be higher. If, in addition, the tenant can show the landlord had already agreed a pre-let with an incoming tenant who intended to strip out and reconfigure the unit regardless of its condition, the second limb could reduce the recoverable damages further still, or eliminate them for the affected items.

This is a fictional illustration to show how the mechanism works; the real figures in any dispute depend on expert valuation evidence specific to the property.

The Leasehold Property (Repairs) Act 1938: extra protection during the lease term

Where a landlord serves an interim schedule and follows it with a formal notice under section 146 of the Law of Property Act 1925 (a precondition to suing for damages or forfeiting for breach of a repairing covenant), the Leasehold Property (Repairs) Act 1938 can impose an additional hurdle — but only where specific conditions are met:

• The lease must have been originally granted for a term of 7 years or more.
• At the date the section 146 notice is served, 3 years or more of the term must remain unexpired.
• The notice must relate to a breach of a covenant to repair.

Where these conditions apply, the tenant can serve a counter-notice within 28 days of the section 146 notice. Once a valid counter-notice is served, the landlord cannot proceed with a damages claim or forfeiture without first obtaining the leave of the court, and the court will only grant leave if the landlord proves one of a limited set of statutory grounds — broadly, that immediate repair is needed to prevent substantial diminution in the value of the reversion, that it is needed to comply with a legal requirement, that it is needed in the interests of another occupier, that the cost of immediate repair is small relative to the cost of delay, or that special circumstances make it just to allow the claim to proceed.

Because the 3-years-unexpired condition can, by definition, never be met once a lease has already come to an end, the 1938 Act has no application to terminal or final schedules — it exists specifically to stop landlords using mid-term disrepair notices as leverage against tenants who still have years left to run, and who might otherwise be pressured into expensive works long before they are actually necessary.

Schedule of condition: limiting what you're liable for

A schedule of condition, agreed and annexed to the lease at the outset, is a photographic and written record of the property's actual state when the tenant took occupation. Where the lease expressly ties the repairing covenant to that schedule — typically wording along the lines that the tenant is not obliged to put the property into any better condition than shown in the schedule — it can significantly limit the tenant's dilapidations exposure at lease end, because the tenant is only required to hand back a property in no worse condition than it started, not in some notional "perfect" condition.

The schedule of condition only works this way if the lease clause actually cross-refers to it. A schedule of condition prepared but never linked into the repairing covenant carries much less legal weight, since the general repairing obligation in the lease will usually still apply in full.

How to respond to a Schedule of Dilapidations

1. Read your lease carefully. Go back to the lease itself before reacting to any schedule. The repairing covenant, the decorating clause, any schedule of condition, and any licences for alterations all shape what you are actually liable for. The schedule is only as strong as the lease clauses it relies on.
2. Identify the type of schedule. Confirm whether you have an interim, terminal, or final schedule — this determines whether the 1938 Act is relevant, whether the Dilapidations Protocol timetable applies, and how urgent your response needs to be.
3. Instruct your own surveyor early. A chartered building surveyor acting for the tenant can inspect the property, compare the claim item by item against the lease, and flag anything overstated, outside the tenant's liability, or already remedied. Early advice tends to reduce the final figure significantly and puts you in a stronger negotiating position.
4. Factor in the section 18 cap. Ask your surveyor or adviser whether a diminution-in-value valuation is worth obtaining — particularly if the property is likely to be redeveloped, relet on different terms, or is in a weak local market, all of which can pull the recoverable figure well below the costed schedule.
5. Respond within the Protocol timescale. Where a terminal or final schedule has been served, aim to provide your Scott Schedule response within the Protocol's 56-day period, addressing each item individually rather than rejecting the schedule wholesale.
6. Attend the without-prejudice meeting. Most disputes that reach this stage settle at or shortly after the Protocol meeting. Coming prepared with your surveyor's position on each item gives the meeting the best chance of producing a workable settlement figure.
7. Take advice before agreeing or ignoring anything. Whether you are weighing up a settlement figure, considering whether to carry out works yourself, or deciding how to respond to a section 146 notice, getting advice on your specific lease and circumstances early tends to be far cheaper than dealing with a dispute that has escalated to court.

Negotiating a settlement

In practice, the overwhelming majority of dilapidations disputes settle without a final court hearing. The mechanics that tend to drive settlement are the same ones described above: the tenant's surveyor challenges individual items and costings through the Scott Schedule response; the section 18 cap sets a ceiling based on diminution in value rather than the cost of works; and the Protocol's cost sanction gives both sides an incentive to engage constructively rather than let the matter drift.

Where a tenant is assigning the lease rather than seeing it out to expiry, dilapidations liability can also become relevant to the assignment itself — see our guide on assignment of a business lease for how liability for repair can pass, or continue to attach, when a lease changes hands.

Common mistakes to avoid

• Paying the costed figure without checking the section 18 cap. The number on the schedule is a costed estimate of works, not automatically the legal damages figure — the cap can be significantly lower.
• Ignoring the schedule of condition. If one was agreed at the start of the lease and the repairing covenant refers to it, it can materially reduce what you owe — but only if someone actually checks the lease wording rather than assuming the general repairing covenant applies without qualification.
• Missing the 28-day counter-notice window. For an interim schedule where the Leasehold Property (Repairs) Act 1938 applies, failing to serve a counter-notice within 28 days of the section 146 notice gives up a real procedural protection.
• Responding item-by-item without engaging a surveyor. A tenant's own written objections carry far less weight than a surveyor's Scott Schedule response grounded in an inspection and the lease terms.
• Letting the Protocol timetable slip without explanation. Both landlords and tenants who ignore the Protocol's timescales risk a costs penalty later, even where their substantive position on the disrepair is sound.

This guide provides general information about how Schedules of Dilapidations work in England and Wales. It is not legal advice and is not a substitute for advice tailored to your lease and your specific circumstances. The law described was accurate as at July 2026 and is subject to change — always check GOV.UK and legislation.gov.uk for the most current position, and read the actual wording of your lease before relying on anything in this guide.

Last reviewed: July 2026 by a non-practising solicitor · Next review due: July 2027 or on legislative change.