What Is a Section 18 Valuation?
How the law caps a landlord's claim at the loss in property value.
A Section 18 valuation caps a landlord's dilapidations claim at the amount by which the disrepair has reduced the property's market value, which under Section 18 of the Landlord and Tenant Act 1927 cannot exceed the cost of the works where the landlord intends to demolish or redevelop.
How Does the Section 18 Cap Work?
The cap works by comparing the property's value in its current state of disrepair against what it would be worth if the tenant had fully complied with the lease covenants.
If the cost of the repairs is £100,000, but the disrepair only reduces the building's market value by £40,000, the landlord's claim for damages is legally capped at £40,000. This is known as the diminution in value.
How Does It Relate to Redevelopment?
The second limb of Section 18 states that a landlord can claim nothing for repairs if they intend to demolish the building or enact structural alterations that would render those repairs useless.
This overlaps heavily with the principle of supersession. If the landlord plans to rip out the ceiling to install a new HVAC system, they cannot charge you for replacing the ceiling tiles.
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Can Landlords Ignore Section 18?
Landlords cannot ignore Section 18 during a cash settlement negotiation, but the cap does not apply if they legally force you to carry out the physical works before the lease expires.
This is an important distinction. Section 18 is a defence against a financial claim for damages after the lease ends. During the lease, you are still bound by the covenants to maintain the property.
How Do You Use Section 18 in Negotiations?
Your surveyor will use a Section 18 valuation during protocol negotiations to force the landlord to reduce their dilapidations claims to a realistic level.
It is particularly effective for older, secondary-market industrial units where expensive roof repairs might cost more than the entire capital value of the building.
Frequently Asked Questions
When should I commission a Section 18 valuation?
You should commission a Section 18 valuation if the landlord's claim is exceptionally high and you believe the required repairs do not actually add equivalent value to the building.
Does Section 18 apply to reinstatement?
Section 18 strictly applies to repair covenants. However, common law principles often restrict reinstatement claims if the reinstatement does not affect the property's value.
Who carries out a Section 18 valuation?
A specialist commercial valuation surveyor carries out the assessment, as it requires complex understanding of local property markets and investment yields.
Been served a schedule?
Get a fixed price for the works. We price line by line against your schedule.
Understanding the legal caps on claims is essential, but the surest way to cap your costs is to control them directly. Our team provides fixed-price dilapidations works, ensuring you only pay market rates to exit your lease cleanly.