Expert determinator Chris Sullivan plays action hero, grappling with the key changes in the recently published seventh edition of the RICS guidance note
For an issue that many know very little about, dilapidations rears its head on an almost constant basis and is the cause of endless disputes between landlords and tenants. It is also something that has undergone a lot of change over the past few years, thanks in part to the constantly evolving retail and office occupation landscapes, but also prompted by the introduction of the RICS Dilapidations Protocol in 2012.
In response to these changes, and to provide greater clarity, this month the RICS has released the seventh edition of its Dilapidations Guidance Note, making it the third new edition in the past five years. The new note has a number of implications for both property owners and their occupiers.
Here is an overview of the main changes.
Parties’ and advisers’ behaviour
One of the major catalysts for disputes is a lack of clarity in lease clauses, or perhaps more accurately a flawed interpretation, although usually there will be case law that can guide how to interpret the more ambiguous clauses. Provided you know what you are doing, preparing and responding to a dilapidations claim should therefore be quite a scientific process.
More often than not, the reason a claim becomes a long-running dispute is that one or both of the parties is trying to do better out of the settlement than the circumstances allow. Generally speaking, this occurs when one of the parties isn’t using a specialist dilapidations surveyor who understands all the intricacies of the process, or one who is just trying to hammer a deal that in unachievable.
As well as clarifying general conduct, the note specifies that surveyors should ensure that any claims documents or correspondence do not contain allegations of breaches that don’t exist, unnecessary or inappropriate repair work or exaggerated figures, which could cost a party dearly in any subsequent litigation.
Experts, advisers and dispute resolvers
Not quite as catchy as Athos, Aramis and Porthos, but the new note seeks to provide greater clarification on the roles of dilapidations’ three musketeers: expert witnesses, professional advisers and independent dispute resolvers.
There has been much debate in recent years about where the line is drawn between acting as an adviser to a client and an expert for the court, often stemming from arguments over fees and incentives and the question of whether or not a surveyor working on a percentage-based incentive of a settlement can later become a trusted witness.
In brief, the note states that an adviser’s role is to identify and comment on breaches in order to prepare the relevant documents and provide advice on the strategy and tactics in relation to negotiating a settlement. The surveyor only becomes an expert witness once a formal instruction is given to prepare evidence for trial. At that point, the surveyor has a duty to the court as an expert. It should go without saying that a surveyor should consider that their appointment could progress into the role of expert when acting as an adviser.
A dispute resolver, also known as an independent expert determinator, must, it says, be appointed by private agreement between both parties or through the RICS Dispute Resolution Service. More on them later.
Supersession and energy standards
Supersession is another term that is becoming commonplace in dilapidations, but is made more complicated by a lack of a universally adopted approach. While not putting the debate entirely to bed, the guidance note does go in to more detail than ever before as to what constitutes supersession and gives guidance on situations where supersession is likely to be accepted and when it is not.
The note makes specific reference to situations where a landlord may want to upgrade a building and its services in order to comply with minimum energy performance standards, and bring the property above an F EPC grade by 1 April 2018.
Settling disputes through determination
A handful of dilapidation surveyors, myself included, have the privilege of calling ourselves expert determinators. Disappointingly, rather than meaning we are part surveyor/part robot, riding around on a motorbike wielding a big gun, it instead allows us to act as independent experts with the power to determine a settlement instead of a dispute going through the courts.
This section is new to the guidance note and covers advice on negotiations and alternative dispute resolution, reflecting the growing trend for parties to try to settle without going through costly proceedings.
The guidance note also includes a new section on diminution valuations, a new emphasis on quantified demands and expanded guidance on break clauses. To find out more about those you will need to come along to our annual dilapidations seminar, where, in my best Arnie voice, “I’ll be back”.
Chris Sullivan is a partner at Malcolm Hollis and a qualified independent expert determinator. He was part of the RICS Dilapidations Guidance Note (7th Edition) working group
