The Section 18 Cap on Dilapidations
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
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Section 18(1) of the Landlord and Tenant Act 1927 is the single most important rule in dilapidations. It caps what a landlord can recover, and it can wipe out a claim entirely.
The diminution cap
Damages for breach of a repairing covenant cannot exceed the diminution in the value of the landlord's reversion caused by the disrepair. In plain terms: however big the cost of the works, you can only recover the amount by which the disrepair has actually reduced the value of your interest in the property.
The redevelopment trap
There is a second limb. If the property is to be demolished or structurally altered shortly after the lease ends, in a way that makes the repairs pointless, no damages are recoverable for those repairs. So if you are redeveloping, your dilapidations claim may fall away, because the tenant's failure to repair has caused you no real loss.
Why it matters
Landlords sometimes pursue a claim for the full cost of works, only to find the recoverable figure is far lower once diminution is assessed. A diminution valuation by a valuer, comparing the reversion's value with and without the breach, is what fixes the ceiling.
Get both surveyors
A robust claim usually needs a building surveyor for the cost of works and a valuer for the diminution assessment. Take advice before assuming the schedule value is what you will recover. See the dilapidations guide.
What is the section 18 cap?
Section 18(1) of the Landlord and Tenant Act 1927 caps dilapidations damages at the diminution in the value of the landlord's reversion caused by the disrepair.
Can I claim dilapidations if I am redeveloping?
Often not. If the property is to be demolished or structurally altered so the repairs are pointless, the cap can reduce the claim to little or nothing.