The Impact of Alterations on Your Dilapidations Liability

Overview

Alterations made during your tenancy. such as installing new partitions, changing flooring, adding specialist fixtures, can significantly increase your dilapidations liability if not managed correctly. Here we explain what dilapidations liability means in the context of alterations, how damages are calculated (especially regarding alterations vs. repairs), and whether a landlord can still claim dilapidations after forfeiting a lease (ending it early due to breach). Understanding these points will help you plan modifications and exits more cost-effectively.

How Tenant Alterations Affect Dilapidations Liability

Dilapidations liability is essentially your responsibility to undo the “wear and tear” or changes to the premises by the end of the lease. When you make alterations to a commercial property, you often take on an additional obligation to reinstate the premises to its original layout and condition at lease end (unless the landlord agrees otherwise). Most leases have clauses stating that if the tenant makes alterations (with landlord’s consent), the landlord can require them to be removed at the end. Indeed, typically “on granting consent for alterations the landlord requires that at the end of the lease you restore the property to its original state if requested”.

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Implications of alterations:

• Reinstatement Obligation: If you put up partitions, move walls, install heavy machinery, or even just repaint in non-standard colours, your lease likely says you must remove and make good at the end (if the landlord demands). This means your dilapidations liability isn’t just about fixing damage it’s about the cost to undo any improvements you added. For example, removing a mezzanine floor you built, or tearing out bespoke installations and repairing any damage from their removal.
• Added Costs: Alterations can be expensive to reverse. Tenants often underestimate this. E.g., taking down a partition wall isn’t just knocking it out, you must repair the ceiling, flooring, and walls where it attached, and perhaps repaint entire areas for an even finish. The more extensive your fit-out, the higher your potential dilapidations bill to restore the “base build.” Landlords know this and will pursue it if it’s in the contract.
• Licences to Alter: If you formally obtained the landlord’s consent via a License to Alter, check what it says about reinstatement. Sometimes, landlords specify in writing whether you must remove a particular alteration or if they’ll allow it to remain. If you have it in writing that you can leave an alteration in place (i.e., the landlord won’t require reinstatement), that can save you a huge cost. Absent that, assume you’ll need to reinstate. (There are cases where an alteration obviously improves the property, say you upgraded HVAC, in which the landlord might not require removal. But unless waived, it’s legally their call.)
• Alterations and Repair Covenants: Note that even alterations you don’t have to remove must still be kept in repair. For instance, if you added a glass partition and are leaving it in place with landlord’s agreement, you’ll need to fix any cracks or issues with it, just as you would any other part of the premises.
• Value-Add vs. Diminution: Occasionally, a tenant believes “I improved the property, so I shouldn’t owe anything.” While improvements can benefit the landlord, the lease usually doesn’t give credit for that. However, see Section 18 in previous section – if your improvement would be torn out by a new tenant, the landlord’s claim for not removing it might be limited. But in general, count improvements as neutral or a negative for dilapidations liability unless agreed otherwise.

Bottom line: Alterations often increase your dilapidations liability because you’re promising to deliver the property back in its pre-altered state. The only way they wouldn’t is if the landlord explicitly releases you from that or if you negotiate at lease end to leave them (and landlord finds value in them). Always factor in the full lifecycle cost of any alteration: initial build-out plus eventual removal.

What Damages Can a Landlord Claim for Dilapidations?

Damages for dilapidations aim to put the landlord in the position they would have been in had you complied with the lease. They are typically monetary compensation for breaches of your repair or reinstatement obligations. Here’s how it works:

• Cost of Repair or Reinstatement: Generally, the measure of damages is the reasonable cost of the necessary works to rectify each breach. If you didn’t repaint as required, the cost of painting is the damage. If you left an alteration in place, the cost to remove it and restore finishes is the damage. However, there is a critical legal limit: the damages “shall in no case exceed” the amount by which the property’s value is diminished due to the breaches (Section 18(1) of LTA 1927). This means if something would cost £50k to fix but only adds £10k to the property’s value, the landlord could be capped at £10k claim for that item.
• Reinstatement and Redecoration: It’s important to note that the Section 18 cap applies to repairs (breach of repair covenants). It *does not apply to breaches of the covenant to reinstate alterations or to redecorate. Those are treated differently: If you fail to remove an alteration or to repaint as promised, the landlord’s damages are the actual reasonable cost of doing so (plus any rent loss during the work). There’s no diminution test for these because they are seen as separate contractual obligations. For example, if you built offices in a warehouse and didn’t remove them, and it costs £30k to rip them out and dump materials, the landlord can claim that full £30k (assuming it’s reasonable), even if the presence of those offices didn’t reduce market value (maybe they even add value – irrelevant, because the landlord can insist on removal per contract). This is a crucial point: alteration reinstatement costs are harder to escape than general repairs, because the law gives landlords full recovery on those.
• Loss of Rent & Other Consequential Losses: Landlords can also claim for consequential losses flowing from dilapidations. The most common is loss of rental income for the period it takes to do the works after lease end (often called “holding over” or “delay” damages). They might also claim service charge or insurance costs for that period. These are generally claimable so long as they stem from your breach (e.g., “we couldn’t re-let the property for 2 months because we first had to do the repairs you should have done”). That said, if the property’s value wasn’t really hurt (again Section 18), this can affect loss of rent claims too.
• Professional Fees: As part of damages, a landlord can claim the fees for surveyors or architects needed to specify and supervise the remedial works, as well as legal costs in pursuing the claim (some of this might come via the lease’s indemnity clauses, some as damages).
• Betterment and Reasonableness: A landlord cannot claim “betterment” making the property better than it was. For instance, if you were required to maintain a 10-year-old carpet and you return it heavily worn, the landlord should claim the cost of a 10-year-old carpet’s value, not brand new (or at least deduct for the fact a new carpet is an upgrade). In practice, this often is negotiated. But reasonableness is key: damages are limited to “the reasonable cost of doing the works” to meet the lease standard. If the landlord chooses a gold-plated repair solution that far exceeds what the lease standard was, you have grounds to challenge the excess.

In summary, a landlord can claim a broad range of damages, the entire scope of work to put the place right, potentially capped by value impact (except for alterations where the cap doesn’t apply) and including related losses. For tenants, this means you should always try to mitigate these damages: do some repairs yourself (cheaper than landlord’s), remove alterations if you can, etc. That reduces what the landlord can claim. Also, in a dispute, know your rights: you might argue that some claimed works go beyond lease requirements (betterment) or that the landlord’s valuation of loss is too high.

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Can a Landlord Sue for Dilapidations After Forfeiting a Lease?

“Forfeiture” is when a landlord terminates the lease early due to the tenant’s breach (e.g., serious disrepair or non-payment of rent), by peaceably re-entering or via court order. If a landlord forfeits the lease, can they still pursue the tenant for dilapidations? The short answer is yes, they usually can, though the situation gets legally complex:

• Accumulated Breaches: When a lease is forfeited, it ends the tenancy as of the forfeiture date. But any breaches that existed up to that date can still be actioned. The landlord can claim damages for breach of the repair covenant as of lease termination. Essentially, the lease ends but the liability for past breaches doesn’t disappear. For example, if the landlord forfeited due to disrepair, they can then sue for the cost of that disrepair.
• Procedure – Section 146 Notice: To forfeit for disrepair, landlords must serve a Section 146 notice (Law of Property Act 1925), giving the tenant a chance to remedy. If they then forfeit, the landlord might choose to also sue for damages. There’s a wrinkle: if the lease had at least 7 years originally and at least 3 years remaining, the Leasehold Property (Repairs) Act 1938 applies, requiring the landlord to get court permission to claim damages for disrepair if the tenant served a counter-notice. This Act is designed to protect tenants from excessive claims in forfeiture situations by making landlords prove the severity (significant reduction in value) to get damages. So, yes the landlord can sue, but they must clear that hurdle if applicable. The tenant could block immediate action by counter-notice, forcing the landlord to justify the claim’s merits.
• No “Double Recovery”: A landlord cannot both regain the property and get paid as if it were fully repaired beyond the property’s value. Section 18’s principles still apply in a post-forfeiture claim: damages are limited to the diminution in value due to your breaches. So if they forfeited and demolished the building, they can’t claim repair costs for it (no value loss from your unmade repairs if building is coming down). But they could claim, say, lost value in the interim or any specific losses incurred.
• Forfeiture vs. Dilapidations Strategy: Some landlords choose not to forfeit because it’s sometimes easier to let the lease run out and then claim dilapidations. If they do forfeit, they typically will have weighed that they can still recover what they need via damages (or possibly via drawing on any rent deposit or guaranty). From a tenant view, if you’re in serious breach and facing forfeiture, you might negotiate giving up the lease (surrender) in exchange for the landlord releasing or capping dilapidations claims. Once forfeited, you lost the premises but not necessarily the liability.
• Relief from Forfeiture: Tenants sometimes can ask the court for “relief” from forfeiture, which usually involves fixing the breaches. If granted, the lease continues. If not, forfeiture stands and landlord proceeds with damages.

In essence, forfeiting the lease doesn’t waive the landlord’s right to damages for the condition of the property. They can both take the property back and then sue for dilapidations (subject to the 1938 Act conditions for long leases). Landlords have multiple remedies: “The options available… are forfeiture; claim damages; entry and repair (Jervis v Harris clause); or specific performance.”. They might even threaten forfeiture to prompt the tenant to pay for repairs.

For you as a tenant, if a landlord has forfeited (or is about to), it’s wise to try to strike a deal to settle any claims rather than end up in court. Because yes, you could be on the hook even after losing the space. Also, a post-forfeiture dilapidations claim will follow the same principles as normal, including the legal cap by diminution in value, which is a small silver lining.

Key point: Don’t assume walking away via forfeiture erases your monetary liability. In almost all cases, the landlord can and will chase you for the cost of breaches. The scenario where they couldn’t is if the lease had a clause that expressly made forfeiture their sole remedy (rare), or if they forfeited so late and did such works that no additional loss can be shown. But those are exceptions. Generally, forfeiture + dilapidations claim is a double hit tenants want to avoid.

About Fourth Wall Building Consultancy

Fourth Wall Building Consultancy specialises in UK commercial property dilapidations, offering expert surveying and consultancy services tailored to landlords and tenants. We offer:

• Highly Experienced Chartered Surveyors with a proven track record in dilapidations claims.
• Transparent Pricing Models to help clients budget effectively.
• Early Engagement Approach, minimizing costly end-of-lease surprises.
• Comprehensive Reporting using the latest digital tools for clarity and precision.
• Dispute Resolution Support to avoid expensive litigation.

Related Services

• Dilapidations surveys and schedules
• Pre-Lease compliance and condition assessments
• Building condition reports and maintenance planning
• Dispute negotiation and expert witness support

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