PROTOCOL - The Wait is Over

Further Guidance Topics

The buzz words in dilapidations during the last two years have been ‘Draft Pre-action Protocol’. The period of consultancy is now over, and the document produced by the Property Litigation Association (PLA) is considered by them to be in its final form.

It is hoped that it will become part of an RICS guidance note on dilapidations, and will be submitted to The Lord Chancellor’s Department to be approved under the Civil Procedure Rules (CPR).

The Protocol is now quite clear and unavoidable and it should be used in all claims for damages for breaches of tenant’s repairing obligations, at the expiry of the lease term.

The Protocol encourages the early exchange of full information and enables the parties to avoid litigation by maximising the opportunities for settlement before the proceedings commence. It sets standards for the content of the claim, correspondence and the conduct of pre-action negotiations.

Although the Protocol has not yet been approved under CPR, the courts may treat it as the normal and reasonable approach to pre-action conduct, and non-compliance might bring sanctions against the party concerned. It is therefore essential that surveyors, landlords and tenants understand fully the implications of this document.

The Protocol suggests a time limit of two months, after the end of the term, by which time a landlord should have served the Schedule of Dilapidations. The tenant then has two months to respond and thereafter the respective surveyors should meet on site to discuss the claim, and seek to agree as many of the items in dispute as possible.

Landlords beware! An early assessment of the claim is essential. Although the time limit for service of the Schedule of Dilapidations has been set, surveyors must now carry out a lot of work ‘up-front’. The ‘claim’ should be drawn up as a separate document at the service stage and additional information not previously required should be included.

The claim should identify how it has been compiled, a summary of the facts that the claim is based on, the VAT status of the landlord, all supporting documents, and a date by when the tenant should respond.

The most onerous change however, is found in Protocol Clause 4.1.2. This states that:-

• If the landlord has carried out the work then
  no Section 18 (1) Valuation is required.
• If the landlord intends to carry out the work,
  then it must state when the works are due,
  what steps have been taken towards doing them, and in most cases, it must provide a Section 18 (1) Valuation.
• If the landlord does not intend to carry out the works then it should provide a Section 18 (1) Valuation.

This increased need for a Section 18 (1) Valuation will undoubtedly increase the cost of preparing the dilapidations claim.

The Civil Procedure Rules and the Protocol have fundamentally changed the method in which dilapidations are approached. A clear understanding and application of the procedures is required, if the risk of prejudicing a claim is to be avoided.