When a tenant receives a dilapidations claim, the figure usually reflects the cost of putting the building right. But the cost of works is not always what a landlord can recover. Section 18(1) of the Landlord and Tenant Act 1927 limits damages for breach of a repairing covenant, and it is one of the most useful tools a tenant has when challenging an overstated claim.

What Section 18(1) says

In summary, damages for a breach of a covenant to repair cannot exceed the amount by which the value of the landlord's interest in the property (the reversion) is diminished because the repairs have not been done. In addition, no damages are recoverable if the property will be demolished, or structurally altered in a way that makes the repair work worthless, at or shortly after the end of the lease.

What diminution in value means

A valuer compares two figures: the value of the landlord's interest in the building in its actual condition at lease end, and its value had the tenant complied with the repairing covenant. The difference is the diminution in value. The claim is limited to the lower of that figure and the cost of the works.

When it makes a difference

The cap tends to bite in situations such as:

• The landlord intends to redevelop, demolish or carry out major refurbishment.
• The building is to be sold, and the buyer will not pay less because of the defects.
• The market for the type of property is strong and a new tenant would take it as seen.
• The building is to be re-let with a rent-free period or incentive that already reflects its condition.

If the landlord's plans mean the works will never be done, the claim for their cost is often hard to sustain.

When it does not help

Where the building is in demand and defects clearly reduce its letting value or sale price, the diminution may be close to the cost of works. The result depends on the facts, so it needs evidence, not assertion.

How the argument is run in practice

Section 18 is usually raised alongside a line-by-line review of the schedule. A surveyor tests the items and costs, and a valuer or the surveyor addresses the effect on value. The landlord's intentions, marketing evidence and any refurbishment plans are all relevant. Our guide to challenging a terminal dilapidations claim sets out where this fits in the process, and our dilapidations service page explains how we support tenants.

Frequently asked questions

Does Section 18 apply to every dilapidations claim?

It applies to claims for damages for breach of a repairing covenant. Other types of claim, for example under a reinstatement or alterations covenant, may be treated differently, so the lease wording matters.

Can a landlord ignore Section 18?

No. It is a statutory limit on damages. Landlords often present the full cost of works first, which is why it is worth raising early.

Do I need a valuer?

Often, yes, where the amount is large. Your surveyor can advise whether a valuation opinion is worth obtaining.

This guide is general information, not legal advice. Take legal advice on how the statute applies to your lease.

Speak to Bemerton Consulting about a dilapidations claim you have received.