Section 18 of the Landlord and Tenant Act 1927 says damages “shall in no case exceed” the amount by which the value of the reversion is diminished. So the figure on the schedule is an opening position, not the measure of anything. Sometimes the two are close and the cap does nothing. Sometimes — where the building is coming down, or being stripped out anyway, or the works cost more than the building is worth — the claim collapses to a fraction. The honest answer is that it depends, and this tells you which one you are.
Each one is routinely got wrong, including by people selling you a response.
1. We are not building surveyors and we will not price the works. Responding to a schedule item by item — is this actually a breach, is the standard right, is the specification reasonable, could it be done more cheaply — is building surveying, and it is where the largest reductions are usually won. In one reported case a curtain walling item claimed at £173,388 was answered with a repair at £41,476 and the tenant’s figure was preferred. That is a building surveyor’s work and you should instruct one. What we do is the valuation — the diminution in the value of the reversion, which is the number section 18 actually turns on.
2. We will not tell you the cap will save you if it will not. This is the honest correction to how this subject is usually sold. Where the building is a lettable asset and the works are genuinely necessary to relet it, the courts infer the diminution from the cost of the repairs — and the cap makes no difference. That is what happened in Sunlife in 2013 and again in Peachside in 2024, the most recent full treatment of section 18 there has been. A diminution valuation costs real money, and commissioning one for a case where the cap will not bite is money burnt. We will tell you when not to bother.
3. We will not advise you on the lease, and half the good arguments live there. Whether the covenant bites at all, whether a reinstatement notice was validly served and in time, whether the licence to alter actually requires you to put it back, whether the yield-up wording imports a reinstatement obligation at all — those are questions of construction for a solicitor, and they frequently kill whole heads of claim more cheaply than any valuation. If the schedule includes reinstatement, the first question is not what it costs. It is whether the obligation ever arose.
4. We will not pretend there is data where there is none. You will see confident figures quoted for what proportion of a schedule “typically” settles at, and for dilapidations liability per square foot. None of it is published. No professional body, government source or industry survey publishes settlement rates or fee benchmarks in this field — it is trade convention repeated until it sounds like fact. What does exist is the reported case record, and we have put it on this page with the citations so you can check it.
The heads of reduction applied in the order a court applies them, then the section 18 cap tested against the whole claim. Nothing is stored and nothing is sent anywhere. This is a way of understanding the shape of a claim, not a substitute for a surveyor.
We will tell you whether a diminution valuation is worth commissioning before we offer to do one. Quite often the answer is no.
The reductions applied in order, then the section 18 cap tested against the total.
Read these carefully rather than selectively. Litigated cases are a biased sample — they are the ones that did not settle, usually because the gap between the parties was unusually wide. Note that in two of them the cap made no difference at all. There is no published data on what proportion of schedules settle at, and anyone quoting you one is repeating trade convention.
Indicative only. Not a schedule response, not a valuation, and not legal advice. Nobody has read the lease, the licences to alter, the schedule or the Quantified Demand, or seen the building. Real outcomes turn on the wording of the covenants, the condition of the property at the date of demise, the specification of each item and the landlord’s actual intentions — none of which this can see. The reductions applied here are illustrative percentages, not findings. Get a building surveyor to answer the schedule item by item and a solicitor to construe the lease; those two together usually achieve more than any argument about section 18.
Four of these appear in guidance published by people who ought to know better. Each is checkable against the statute or a reported judgment.
It caps damages for breach of a covenant to keep or put premises in repair. An obligation to remove your alterations and reinstate is a different covenant, and section 18 does not apply to it at all. If a third of your schedule is reinstatement, a third of it is uncapped — and has to be attacked on completely different grounds: was notice validly served, does the licence actually require it, and is the cost disproportionate to the benefit.
It is recoverable as damages if the disrepair caused the void — but it sits inside the section 18 cap, not above it. In Hammersmatch the reasonable cost of works alone exceeded the diminution figure, so loss of rent and insurance were disallowed entirely. Most guidance describes it as an additional head. It is not.
Where the building is lettable and the works are genuinely needed to relet it, the courts infer the diminution from the cost of the repairs. The cap made no difference in Sunlife in 2013 or in Peachside in 2024. On a sound, re-lettable building your savings come from scope, supersession and betterment — not from section 18.
The second limb bars damages entirely, but only where the premises would be pulled down, or so structurally altered as to render the repairs valueless, and the burden is on you. Refurbishment is not structural alteration. What usually works instead is supersession — an item-by-item argument that the landlord’s own works would have made yours pointless, which is far more commonly successful.
If your lease has a self-help clause, the landlord can enter during the term, do the work, and recover the cost as a debt rather than damages — which escapes section 18 entirely, because the cap is expressed to bite on damages. That is Jervis v Harris. It means an interim schedule served on you mid-term is considerably more dangerous than a terminal one, and it is worth checking whether your lease contains the clause.
HMRC’s published position is that dilapidation payments are normally outside the scope of VAT. A 2020 brief said otherwise and was withdrawn and replaced in February 2022. Separately, if the landlord has opted to tax and cannot recover input VAT on the works, that irrecoverable VAT can form part of the loss — which is a different question, and the Protocol requires the demand to state which applies.
The order matters more than the spend. Pick a tab.
Three professionals are involved in a dilapidations claim and we are only one of them. The most useful thing we sell is the note that tells you where your money should actually go — which is frequently not to us.
Indicative only. Not a schedule response, not a valuation, and not legal advice. Nobody has read the lease, the licences to alter, the schedule or the Quantified Demand, or seen the building. The reductions applied are illustrative percentages chosen to show the shape of a claim, not findings on any facts. Fraser Bond is a property agency and valuer. We are not building surveyors — we do not price works or respond to schedules item by item, which is where the largest reductions are usually won. We are not solicitors — we do not construe leases or licences to alter, and questions such as whether a reinstatement notice was validly served frequently decide more than any valuation does. There is no published data in this field on settlement recovery rates, professional fees, or dilapidations liability per square foot. Figures of that kind circulating online are trade convention. What is on this page instead is the reported case record with citations, and that is a biased sample: litigated cases are the ones that did not settle. Section 18 does not cap everything. It applies to covenants to keep or put premises in repair. Reinstatement of alterations is outside it entirely, loss of rent sits inside it rather than above it, and self-help during the term recovers a debt rather than damages and escapes it altogether. Take advice before relying on any of this.
Which regime the claim is actually in, how much of it is reinstatement rather than repair, and whether a diminution valuation would earn its fee. If it would not, we will say so — and if the demand is already close to a fair figure, we will tell you to pay it rather than sell you a fight.
Every one of these has a free tool on it. None of them asks for your details before it gives you an answer.
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Count the dated obligations your estate generatesfrom £58 per site a month →For businesses. The 2026 revaluation put rateable values up 19.6%. If the survey was wrong before, it is now wrong by more.
Your 2026/27 bill and every route to reduce itfree, or 25% of what we save →Almost certainly not that figure, but the honest answer is that it depends on things that are knowable, and you should find them out before you negotiate. Start with what the number is. A schedule of dilapidations is a repair cost, prepared by the landlord's surveyor, and it is an opening position. The claim is something different: damages for breach of covenant, measured by the landlord's actual loss, and then capped by section 18(1) of the Landlord and Tenant Act 1927, which says damages “shall in no case exceed” the amount by which the value of the reversion is diminished by the breach. The Protocol itself makes the point — paragraph 4.5 says the Quantified Demand “should be restricted to the landlord's likely loss… not necessarily the same as the cost of works”. Where the reductions actually come from, in the order a court applies them: scope and standard (is each item genuinely a breach, judged against the condition at the date of demise rather than a modern standard, and could it be done more cheaply — you are entitled to perform in the least onerous way); supersession (work the landlord's own scheme would have made pointless); betterment (the element by which the landlord's works improve on the covenanted standard); and only then the section 18 cap. In the reported cases the range runs from about 17% of the claim to about 83%. There is no published data on what schedules typically settle at, whatever you may be told.
Sometimes. Frequently not, and being straight about that is the point of this page. Where the cap bites hard: the building is dated or obsolete, the cost of the works approaches or exceeds what the property is worth, or the landlord is stripping it out or redeveloping. In Ravengate Estates v Horizon Housing [2007] EWCA Civ 1368 a claim for £288,976 of repairs came down to £50,000, because any purchaser would have redeveloped and only the “survival items” made any difference. In Hammersmatch v Saint-Gobain [2013] EWHC 1161 (TCC) the reasonable cost of works was found at £2,399,104 but the diminution at £900,000 — and the landlord's loss of rent and insurance were refused entirely because the total already exceeded the cap. Where it does nothing at all: the building is a sound, lettable asset and the works are genuinely needed to put it back on the market. There the courts infer the diminution from the reasonable cost of the repairs, because that is exactly what a purchaser would deduct. That is what happened in Sunlife Europe Properties v Tiger Aspect [2013] EWCA Civ 1656, where Lewison LJ put it directly, and again in Peachside Ltd v Lee and Keung [2024] EWHC 921 (TCC), the most recent full treatment of section 18 there has been — the judge preferring the landlord's valuer on the basis that “the market would factor in the cost of necessary works… to make the property lettable”. So the practical question is not “does section 18 help” but which of those two situations you are in — because that determines whether a diminution valuation is worth commissioning at all.
It is two valuations of the landlord's reversion at the termination date: the value it would have had if you had complied with your covenants in full, and the value it actually had in its actual condition. The difference is the diminution, and that is the ceiling on the damages. The discipline is strict — the works are the only variable, everything else is held constant, and you value the property as it actually reverts rather than building in hypothetical deals. The Court of Appeal made that point in Van Dal Footwear v Ryman [2009] EWCA Civ 1478, restoring a diminution figure of £118,838 after the trial judge had cut it to £48,538 on a hypothetical basis. Do you need one? Legally, no — Latimer v Carney [2006] EWCA Civ 1417 confirmed that a claim does not fail for want of one, and that the cost of works can be evidence of diminution where the repairs were no more than reasonably necessary. But the same case shows the price of going without: the Court applied a 60% discount to the repair costs precisely because there was no valuation evidence about how far the disrepair had actually affected the reversion. The Protocol is more directive. Paragraph 9.4 says that where the landlord has not done the works and does not intend to, it should provide a formal diminution valuation. Paragraph 9.5 says that if you rely on a diminution defence, you must state your case and provide one. Practically: commission one where the building is dated, obsolete or heading for redevelopment. Do not commission one for a sound, readily lettable building — you would be buying a report that cannot help you.
No, and this is the single most important thing on this page. Section 18(1) caps damages for breach of a covenant “to keep or put premises in repair”. An obligation to remove your alterations and reinstate is a different covenant altogether — usually found in the licence to alter, sometimes in the alterations covenant or the yield-up clause — and neither limb of section 18 applies to it. A tool or an adviser that applies the cap to a whole schedule containing substantial reinstatement will mislead you badly. Reinstatement is attacked on entirely different ground, and it is usually cheaper to attack. First, was a valid reinstatement notice served, and in time? Very many licences to alter make the obligation conditional on the landlord serving notice within a defined window before expiry. If no valid notice was served, the obligation never arose at all — and the Protocol requires the schedule to identify any such notices, so you can check. Second, does the licence actually require it? A yield-up covenant to deliver up in “good and substantial repair and condition” does not normally import a reinstatement obligation; different wording may. Third, is the cost disproportionate to the benefit? The general principle in Ruxley Electronics v Forsyth [1996] AC 344 applies — cost of cure is not recoverable where it is out of all proportion to the benefit obtained. Fourth, will the landlord strip it out anyway? If so the actual loss may be nil. Note the practical consequence: on this head your first call is a solicitor to read the licence, not a valuer.
They can claim it, but not on top — and that distinction is worth real money. Void costs are recoverable as damages where the disrepair genuinely caused the void, but they form part of the total that section 18 caps, rather than sitting above it. Hammersmatch is the case: the reasonable cost of works alone came to £2,399,104 against a diminution of £900,000, and because the works figure already exceeded the cap, the landlord's claims for loss of rent and insurance were disallowed outright. Most guidance you will read describes loss of rent as an additional head. It is not. There is a second and independent line of attack, which is causation. The landlord has to show that the void flowed from your disrepair rather than from the state of the market, that the period claimed is genuinely what the works reasonably required, and that it marketed the property properly in the meantime. Courts have not been generous here: in Peachside the judge made a single global award of £100,000 against £148,330 claimed for rent and insurance together. The Protocol also requires the landlord to itemise, substantiate and quantify every such head and to explain the legal basis for recovering it — whether as damages or under an express provision of the lease. A great many Quantified Demands simply assert the figures. That is a fair point to press, and it costs you nothing to press it.
Considerably worse, and this is the trap most tenants do not see coming. If your lease contains a self-help clause — and many commercial leases do — the landlord may enter during the term, serve a notice specifying the disrepair, give you a period to remedy it, and if you do not, carry out the works itself and recover the cost from you as a debt. That is Jervis v Harris [1996] Ch 195. The consequence is decisive: section 18 does not apply. The cap is expressed to bite on “damages for a breach of a covenant”, and a debt is not damages. So the landlord recovers the full cost of the works irrespective of what it did or did not do to the value of the reversion, and irrespective of whether the building is about to be demolished. The protections of the Leasehold Property (Repairs) Act 1938 do not apply either — no section 146 notice, no need for the court's leave. Millett LJ put the reasoning plainly: Parliament did not intend to put obstacles in the way of a landlord whose object is to secure that necessary repairs are carried out. Two practical points. An interim schedule deserves more urgency than a terminal one, not less. And a landlord who is alert and still has time left on the lease may act deliberately before expiry precisely to escape the cap — so if you are near the end of a term and a schedule arrives, check the lease for the clause immediately. It will refer to entry, a notice, a remedy period, and recovery of the cost as a debt.
Normally no, and this changed twice recently so a lot of published guidance is out of date. HMRC's current position, set out in its own VAT Supply and Consideration Manual at VATSC05910, is that dilapidation payments “are normally outside the scope of VAT”. The manual explains that HMRC weighed the arguments and decided “not to treat dilapidation payments as further consideration for the supply of a lease”, while reserving the right to depart from that where it sees evidence of value being shifted from rent into a dilapidations payment to avoid accounting for VAT. The history is worth knowing because it is why the internet disagrees with itself: Revenue and Customs Brief 12 (2020) briefly indicated such payments were taxable, and it was withdrawn and replaced by Revenue and Customs Brief 2 (2022), published 7 February 2022, with the revised treatment to be adopted no later than 1 April 2022. That restored the outside-the-scope position. There is a separate question that is often confused with it. Where the landlord has opted to tax the property and therefore cannot recover input VAT on the remedial works, that irrecoverable VAT can properly form part of the loss claimed — because it is a real cost to the landlord. That is not VAT on the settlement; it is VAT as a component of the loss. The Protocol requires the Quantified Demand to state whether VAT applies, so the landlord should have told you which it is asserting. If it has not, ask.
The order matters more than the total, and getting it wrong is how tenants end up paying twice. First, a solicitor on the lease and the licences — does the covenant bite at all, was a reinstatement notice validly served and in time, does the licence actually require reinstatement. Whole heads of claim die there, cheaply, and no amount of valuation work substitutes for it. Second, a building surveyor on the schedule, item by item: is each entry genuinely a breach, is the standard right, is the specification reasonable, is there a cheaper compliant method. That is where the largest reductions are usually won — in one reported case a curtain walling item claimed at £173,388 was answered with a repair at £41,476 and the tenant's figure was preferred. Third, us, and only if the first two suggest the cap has a prospect of biting. Our fees: £650 for a strategy note — which regime you are in, the schedule split into repair and reinstatement, the Protocol points worth pressing, and who to instruct in what order. It is priced deliberately below what any of the individual fights cost, because its main job is to stop you spending money in the wrong place. £1,450 for the diminution valuation itself, prepared on the strict before-and-after basis at the term date, with negotiation included. We will tell you before you commission it whether it is worth commissioning, and on a sound lettable building the answer is frequently no. What we do not do: price the works, or advise on the lease. Anyone offering all three is offering to do two of them badly.
The Dilapidations Protocol has applied since 1 January 2012 and remains current. The timetable, all expressed as “a reasonable time” with stated norms: the landlord should serve the schedule and Quantified Demand generally within 56 days of the termination of the tenancy; the demand should specify a date for your reply, usually within 56 days of it being sent; you should serve your Response within that 56 days; and the parties should hold a without-prejudice meeting, generally within 28 days after the Response. If you rely on a diminution defence, your valuation should generally follow within 56 days of the landlord's detailed breakdown. Both the schedule and your Response require endorsements. The landlord's must confirm that the works are all reasonably required to remedy the breaches, that the costings are reasonable, and — importantly — that full account has been taken of the landlord's intentions for the property. Yours must confirm the equivalent from your side. Both surveyors must have regard to the RICS guidance. What happens on non-compliance is not a knockout blow but it is real: the court takes compliance into account when deciding who pays the costs, and the Practice Direction on Pre-Action Conduct allows it to stay proceedings, make adverse or indemnity costs orders, or adjust interest by up to 10% above base. The Protocol also says the court is not concerned with minor or technical shortcomings, so pointing at trivial slips will not help you. Pointing at a demand with no endorsement, no statement of the legal basis for the consequential heads, and no account taken of the landlord's own intentions, might.
It is a negotiating position, prepared by the landlord’s surveyor, and the Protocol itself says the demand should be restricted to the landlord’s likely loss, which it expressly notes is not necessarily the cost of the works. Whether your number is a tenth of it or four fifths of it depends on things that are knowable — what the landlord is doing with the building, how much of the schedule is reinstatement rather than repair, and whether the works are genuinely needed to relet. Find that out before you negotiate, not after.
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