New Dilapidations Pre-action Protocol

New Dilapidations Pre-action Protocol

An amended version of The Dilapidations Pre-Action Protocol will form part of the Court rules from 1 January 2012.

The purpose of pre-action protocols is:-

1. To focus the attention of litigants on the desirability of resolving disputes without litigation.
2. To enable parties to obtain information they reasonably need in order to enter an appropriate settlement.
3. To make an appropriate offer (of a kind which can have costs consequences if litigation ensues).
4. If pre-action settlement is not achievable to lay the ground for expeditious conduct of proceedings.

The reasons for the latest changes are that:

1. Protocols should not include law.
2. They should not be repetitious of the practice direction for pre-action conduct.
3. They should not express themselves in different language from other protocols and rules.
4. They are general guidance and should be kept as short as possible.

This means that the Protocol is now shorter and a lot of the definitions have been removed for example as to repair, reinstatement and the wording of Section 18(1) set out in Annex A.  Many of the paragraphs have also been summarised and amalgamated although the substance has not changed.

The word “serve” has been replaced with the word “send” throughout as serve has connotations elsewhere in the CPR.  Also the landlord’s “claim” has been replaced by the landlord’s “Quantified Demand” to differentiate it from a formal claim under the CPR.  This Quantified Demand needs to set out the legal basis of the landlord’s claims and is the equivalent of the Letter of Claim which appears in other Pre-Action Protocols.

Timings have also been rationalised so that they are now consistent, for example all timings now refer to being “within” certain periods rather than some being expressed to be “from” certain periods.  It has also been made clear that “surveyor” includes “any other suitably qualified person”.

The wording of the landlord’s endorsement has also been altered slightly to make it clear that what needs to be endorsed is in relation to the landlord’s intention at the end of the term and also to allow for a landlord itself to give the endorsement and not merely its surveyor.  This reflects the fact that the surveyor is often relying on what he has been advised is the position by the landlord.

The following is the wording of the new form for landlord’s endorsement.

• “3.6.1 All the works set out in the Schedule are reasonably required to remedy breaches referred to in paragraph 3.1 above;
• 3.6.2    Where endorsed by the landlord, that full account has been taken of its intentions for the property;
• 3.6.3    Where endorsed by the landlord’s surveyor, that full account has been taken of the landlord’s intentions for the property, as advised by the landlord; and
• 3.6.4    The costs, if any, are reasonable.”

This new form of endorsement means the landlord will have to confirm if he intends to demolish the building or if the landlord has an intention to carry out works which will result in part of the claim for dilapidations being redundant.  Effectively if either of these two situations apply then the landlord or his surveyor will not be able to sign the endorsement.

Most significantly, the Protocol has now introduced the requirement for an endorsement by the tenant’s surveyor.  This means that the tenant’s surveyor should not look to go in at a lower cost than he honestly believes is the case, or to take out works that he considers should actually be done.  Other than that, the tenant’s surveyor is just answering the landlord’s claim and does not have to point out other items that should be done if they have not been included by the landlord.  Although the tenant’s surveyor may not be told by the landlord what the landlord’s intentions are, the tenant’s surveyor may have a reasonable idea as to what would be the best thing to do with the building and what he “reasonably believes” would be the landlord’s intentions.  This means if the tenant believes the works will be superseded, either by other works or because of the landlord’s other intentions, then he must say so.

The following is the wording of the tenant’s surveyor’s endorsement:

• “5.5.1  The works detailed in the Response are all that were reasonably required for the tenant to remedy the alleged breaches of its covenants or obligations;
• 5.5.2    Any costs set out in the Response are reasonably payable for such works; and
• 5.5.3    Account has been taken of what the tenant, or tenant’s surveyor, reasonably believes to be the landlord’s intentions for the property.”

The surveyors are encouraged to meet before the tenant’s Response is served and are required to meet afterwards.  Following this meeting, the landlord is expected to produce a detailed breakdown of the issues.

The requirements in relation to diminution valuations have not changed, but the wording has been summarised.  The position in relation to diminution valuations is still that:

• If the landlord has done the works the starting point is that a valuation is not required.
• If the landlord has not done any works the starting point is that a valuation is required.
• If the landlord has done some but not all of the works or intends to do all, the starting point is that a valuation is required and also that the landlord provides information as to what works it is going to do, when, and provides estimates and tenders.

Now that the Dilapidations Protocol will form part of the CPR, there is the added impact of the possibility of the Court looking at sanctions for non compliance.  As a result of concerns that some surveyors may seek to take advantage of this by arguing over minor breaches of the Protocol, it has been decided that the issue of compliance will go to costs and other sanctions at the end of the day, but strict compliance is not always going to be necessary, depending on the circumstances.

This means that essentially the issue of costs and compliance with the Protocol is something that is going to be left for the trial judge at the end of the matter when taking everything into account.

The RICS has been working on a new version of its Guidance Note (including alterations from Lord Neuberger) and this is likely to be available for general consultation quite soon after the Dilapidations Protocol comes into effect.   A draft is due to be put on the RICS website for consultation.

Please let us know if you would be interested in attending a seminar on this subject.  The RICS has confirmed that CPD points will be available for attendance, provided the seminar is relevant to the attendees role as a surveyor.

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