Dilapidations Claims and Section 18 Caps Explained

At the end of a commercial lease, the landlord will usually claim that the tenant has not met its obligations to repair, redecorate and reinstate. The claim often starts with a schedule priced at what the works would cost. But the law does not simply award the cost of works. Damages are generally limited to the landlord's actual loss, and for repairs that limit is written into statute by Section 18 of the Landlord and Tenant Act 1927. Understanding how that cap works is one of the most effective ways for tenants to reduce a claim, and for landlords to make realistic ones.

What is a dilapidations claim made of?

See what are dilapidations? and schedule of dilapidations for the underlying obligations and format.

Section 18(1): the first limb

The first limb says that damages for breach of a covenant to repair cannot exceed the amount by which the value of the landlord's reversion is diminished by the disrepair. In practical terms, a valuer compares:

• The value of the landlord's interest if the premises were in the condition the lease requires
• Its value in the actual condition at lease end

The difference is the diminution in value, and the repair claim is capped at that amount. In a strong letting market, where a new tenant would pay much the same rent regardless, the diminution can be well below the cost of works.

Section 18(1): the second limb

The second limb says that no damages are recoverable for failure to put or leave premises in repair if, at or shortly after the end of the lease, the premises are to be demolished or structurally altered in a way that would make the repairs valueless. This is often called supersession. Evidence of the landlord's intentions, such as refurbishment plans, planning applications and tender documents, is central.

Does Section 18 apply to reinstatement and redecoration?

The statutory cap applies to repair covenants. Reinstatement and redecoration claims are assessed under general principles of contractual damages, which also look at the landlord's actual loss. If a landlord is going to strip out and refurbish anyway, a claim for reinstating partitions or redecorating may be reduced or defeated on loss grounds. Legal advice on the specific lease and facts is important.

How does a diminution valuation work?

A valuer, typically a chartered surveyor specialising in valuation, considers the market for the premises, the likely approach of a buyer or incoming tenant, comparable evidence and the landlord's intentions. Valuations can be prepared by either side; under the Dilapidations Protocol, a landlord should consider diminution before issuing proceedings, and a tenant relying on Section 18 should provide supporting evidence. See the Dilapidations Protocol.

Works-based costs still matter

Even where Section 18 is relevant, the cost of works is usually the starting point. A realistic price for the actual works narrows the gap between parties. Typical London office costs are around £8 to £20 per sq ft for strip-out, £15 to £35 per sq ft for reinstatement to Cat A and £4 to £10 per sq ft for redecoration, excluding VAT, with total office claims commonly around £25 to £65 per sq ft. We provide works-based pricing that both landlords' and tenants' surveyors use. See office dilapidations in London.

Tactics for tenants

• Start early with a dilapidations survey and liability assessment
• Consider doing works before the lease ends, if agreed with the landlord
• Obtain evidence of the landlord's plans for the building
• Challenge betterment and inflated rates; see dilapidations report
• Consider commissioning a Section 18 valuation where the claim seems out of line with likely loss
• Keep to Protocol timescales

Tactics for landlords

• Serve a clear, well-evidenced schedule promptly
• Consider diminution before issuing a quantified demand
• Be transparent about intentions for the building
• Use realistic rates for the works
• Engage in meaningful negotiation; courts expect proportionate conduct

Limitation periods

Claims are generally subject to a six-year limitation period for leases signed under hand and twelve years for leases executed as deeds, running from the breach, which for terminal dilapidations is usually the lease end. Most claims are resolved well within those periods.

Section 18 and accounting

Where Section 18 is likely to cap a claim, that may be relevant when estimating a provision for dilapidations in the accounts. See dilapidations provision.

VAT on settlements

Dilapidations damages are normally outside the scope of VAT. Works you carry out yourself attract VAT. See VAT on office refurbishment and dilapidations.

Settling a claim

Most claims settle by negotiation, usually after the tenant's response and one or more meetings between surveyors. Settlements are often a single payment in full and final settlement, sometimes combined with works the tenant has already carried out. Alternative dispute resolution, such as mediation or expert determination, can help where negotiations stall. Litigation is relatively rare and costly, and the Dilapidations Protocol encourages parties to resolve claims without it.

Evidence that helps in a Section 18 argument

• Marketing particulars and letting evidence for comparable space
• Planning applications or refurbishment proposals for the building
• Board minutes or tender documents showing the landlord's intentions
• Photographs and surveys of the premises at lease end
• Valuation reports prepared by experienced valuers

Common misunderstandings about Section 18

• It does not mean tenants pay nothing. It caps repair damages at the loss in value, which may still be substantial.
• It is not automatic. The tenant usually needs evidence, often a valuation, to rely on it.
• It does not cover every head of claim. Reinstatement and redecoration are assessed on general loss principles.
• Landlord intentions matter. Plans to refurbish or redevelop can reduce or remove repair damages.

Where to get advice

Dilapidations claims sit at the meeting point of building surveying, valuation and property law. Most tenants and landlords appoint a building surveyor first, bringing in a valuer for Section 18 and a solicitor where legal issues or proceedings arise. A works-based price completes the picture by showing what the works would really cost.

Get a works-based price

Whether you are a landlord or tenant, accurate costs help settle a claim. Send us the schedule and we will price the works as we would deliver them. Request a quote through our form.

Frequently asked questions

Related guides

• Office Fit-Out Cost per Sq Ft and per m² in London (2026)
• Cat A vs Cat B Fit Out: What’s the Difference? (2026)
• The Dilapidations Protocol: Steps and Timescales Explained
• VAT on Office Refurbishment and Dilapidations Explained
• Office Dilapidations in London: A Tenant’s Guide
• Office Fit-Out Cost Calculator London (2026)
• Office refurbishment and fit-out in London
• Areas of London we cover