When your office lease is coming to an end, you face a choice that has a real bearing on your final bill: carry out the works your lease requires yourself, or agree a cash payment with the landlord instead. Both routes are legitimate, and the right one depends on your circumstances. This guide sets out how they differ, what each typically costs and how to decide.
A quick recap: what are dilapidations?
Dilapidations are the works you are obliged to carry out at the end of your lease to return the premises to the condition it requires. That usually means repairing disrepair, removing alterations you made and redecorating. If you do not do the work, the landlord can claim the cost from you. For the full picture, see our guide to office dilapidations.
Option one: reinstatement (doing the works yourself)
Reinstatement means you appoint a contractor and carry out the works, stripping out your fit-out, making good and redecorating so the space is handed back in the required condition. Its main appeal is control. You choose the contractor, you manage the cost and you pay commercial rates rather than a landlord’s often higher estimate.
Typical contractor-delivered costs for a London office are, per square foot, around £3 to £8 for strip-out only, £8 to £15 for strip-out and basic make-good, and roughly £15 to £40 for full Category A reinstatement, depending on how much of the ceiling grid and services can be kept. The works usually take four to eight weeks on site and must finish by the lease-end date, so they need planning well in advance.
Option two: settlement (a cash payment instead)
Settlement means you negotiate a payment to the landlord in lieu of doing the works. The landlord then takes the space as it is and does what they wish with it. Settlement can be quicker and less disruptive, and it is often sensible when time is short or the landlord intends to redevelop or re-let in a way that makes your works pointless.
Landlords’ claims for the same scope commonly come in 20 to 35 per cent above what a contractor would charge, because they include the surveyor’s fees, preliminaries, contract administration and sometimes loss of rent. So an unchallenged settlement is rarely the cheap option.
The legal limit that shapes a fair settlement
A landlord’s loss is capped by law. Under section 18 of the Landlord and Tenant Act 1927, damages for breach of a repairing covenant cannot exceed the amount by which the landlord’s interest in the property has fallen in value because of the breach. No damages are recoverable for work that would be wasted because the landlord intends to demolish or substantially alter the premises. If the landlord is about to strip the space anyway, the works you did not do may have caused them little real loss, which can reduce a fair settlement dramatically.
An illustrative example
Take a 2,500 sq ft office with a few partitioned rooms, a kitchen and extra cabling. The landlord’s surveyor serves a schedule priced at £62,000. A contractor prices the same scope at £44,000 and your adviser identifies £8,000 of items outside your liability or amounting to betterment. Reinstating yourself would cost around £44,000 less the items removed from the scope, and you control the programme. If instead the landlord confirms they are stripping the floor for a full refit, a settlement based on their real loss might land well below both figures. These numbers are illustrative, not a forecast, but the pattern is common: the route that wins depends on the landlord’s plans and the evidence you hold.
Reinstatement or settlement: which is cheaper?
There is no universal answer, but a few factors tip the balance:
- Choose reinstatement when you have eight weeks or more before handback, your obligations are clear and you can get the works done at competitive rates.
- Lean towards settlement when time is short, when the landlord plans to redevelop or refit, or when the works would add little to the property’s value.
- Test the landlord’s schedule either way. Initial claims are frequently higher than the amount finally agreed.
Under eight weeks, options narrow and prices tend to rise. Under four, a settlement may be forced on you.
What is a schedule of dilapidations?
Whichever route you head towards, the process usually begins with the landlord serving a schedule of dilapidations, often prepared by a surveyor, listing the breaches the landlord alleges and the works or costs needed to remedy them. The Dilapidations Protocol, which applies to claims in England and Wales, expects the schedule and the tenant’s response to be exchanged within set periods, commonly 56 days at each stage. The schedule is the starting point for negotiation, not the final word.
What a settlement agreement should cover
If you settle, make sure the written agreement is clear about the following:
- That the payment is in full and final settlement of all dilapidations and related claims under the lease.
- Whether VAT applies to the payment.
- The date by which payment must be made, and any release of the landlord’s right to enter and inspect.
- Whether you remain liable for rent, rates or service charge for any period after the lease ends.
- Whether the settlement releases any guarantor or deposit.
Take legal advice before signing, because a settlement is hard to reopen.
Timing: why the lease-end date is not the real deadline
The biggest mistake tenants make is leaving dilapidations until the lease is almost up. If you intend to reinstate, the works have to be planned, priced and finished before handback, which can mean starting six to nine months out. If you intend to settle, you want time to challenge the schedule and negotiate from choice rather than panic. See our guide to how long an office fit-out takes for realistic programmes, and how to avoid a costly dilapidations bill for the full timetable.
How to protect yourself either way
- Read your lease early and understand exactly what you must do and by when.
- Check what your licence to alter said about removing alterations, as this drives much of the claim.
- Get your own surveyor or contractor to review the landlord’s schedule before you agree anything.
- Start the conversation early rather than in the final weeks, when you have no leverage and no time.
Getting the best outcome
The decision is about weighing time, cost and control against the landlord’s real intentions for the space. Get advice, test the numbers and do not assume the first figure is the one you have to pay.
Beem Interiors prices reinstatement works honestly and helps tenants see where a settlement may serve them better. Our dilapidations and end-of-lease works service covers single rooms up to whole floors. Get in touch for an itemised quote or a no-obligation chat about your lease end.
