Definition

In an APC context, a negotiation process is the structured sequence of preparation, exchange, concession and agreement by which two parties resolve a dispute without formal proceedings. Dilapidations negotiations (disputes about a tenant's obligation to repair or redecorate at lease end) are among the most common scenarios for building and commercial property surveyors. The RICS professional guidance on dilapidations provides the framework.

Why this matters for Communication and Negotiation

  • Dilapidations negotiations are frequently referenced in APC case studies across building surveying and commercial property pathways.
  • At Level 2, assessors expect you to walk through a real negotiation step by step, explaining the evidence used and the decisions made.
  • Preparing a Scott Schedule, conducting without-prejudice correspondence and documenting a settlement are core practical skills tested at this level.
  • Rule 3 (Service) requires the surveyor to pursue the best available outcome for the client; Rule 1 (Honesty and Integrity) prohibits inflating claims or making concessions without evidential justification.

Key principles

Preparation: building the evidential foundation

Before contacting the counterparty, the surveyor must inspect the property and prepare a schedule of dilapidations setting out every alleged breach of the repairing covenants, with a cost to remedy each item. The schedule must be tested against the diminution-in-value cap under section 18(1) of the Landlord and Tenant Act 1927. In many cases this cap is lower than the cost of works, so an independent valuation is required. The landlord's intentions for the property also affect the cap.

Initial contact and exchange of positions

The schedule is served on the tenant with a covering letter inviting a response. Without-prejudice negotiations open with a meeting or exchange of written positions. The tenant's surveyor will respond with a counter-schedule identifying items accepted, disputed on liability or challenged on cost. The landlord's surveyor must consider each counter-position on its merits and concede on items supported by the lease terms or a credible cost argument.

Moving to agreement

Concessions should be conditional and strategic: "If you accept item 12 at our figure, we will reduce item 7 to your quantum." Every concession is documented in the running Scott Schedule. When the gap narrows sufficiently, a settlement meeting is convened and a figure agreed, confirmed in a without-prejudice save as to costs letter (or an open letter once all terms are settled), followed by formal payment.

Documenting the outcome

The settlement must be confirmed in writing as soon as agreement is reached, stating the agreed sum, the basis (full and final settlement) and the payment deadline. The client must confirm in writing before it is binding. File notes of every call and meeting should be maintained for the audit trail.

Relevant RICS guidance and legislation

  • RICS Rules of Conduct (effective 2 February 2022) — Rule 1 (Honesty and Integrity) and Rule 3 (Service) govern the negotiation and the quality of advice to the client.
  • Landlord and Tenant Act 1927, section 18(1) — caps the landlord's claim at the diminution in the value of the reversion.
  • RICS professional guidance on dilapidations — the framework for preparing and negotiating dilapidations claims.
  • Leasehold Property (Repairs) Act 1938 — procedural protections for tenants where the landlord seeks to recover repair costs.

Ethics and Rules of Conduct angle

Rule 1 (Honesty and Integrity) prohibits inflating a claim with items that are not genuine lease breaches, or using without-prejudice correspondence to misrepresent the evidence. Rule 3 (Service) requires honest advice on the likely outcome. A surveyor who encourages a client to reject a reasonable offer to generate further fees is in breach of both rules.

APC-style Q&As

Q (Level 1)What is the purpose of section 18(1) of the Landlord and Tenant Act 1927 in a dilapidations negotiation?

Section 18(1) caps the landlord's claim at the amount by which the tenant's breach has reduced the value of the reversion. Even where the cost of making good all breaches exceeds that cap, the landlord can only recover the lower amount, established by comparing the property's value in its current state with its value in full repair.

Q (Level 1)What is a Scott Schedule and how is it used in a dilapidations negotiation?

A Scott Schedule is a tabular document setting out each alleged breach, the landlord's claimed remedy and cost, the tenant's response, and a column for the agreed or tribunal-determined figure. It provides a running record of settled and disputed items and is the standard format in dilapidations litigation.

Q (Level 2)You are acting for the landlord in a dilapidations claim. The tenant's surveyor disputes three items totalling £12,000 on the grounds that the works were already carried out during the lease. How do you respond?

(example) I would request evidence that the works were carried out (invoices, photographs or a signed schedule). If credible, I would concede those items and revise the schedule. If the evidence is incomplete or the works were substandard, I would maintain the claim and explain my reasons in writing, inviting further documentation. All responses are documented in the without-prejudice file.

Q (Level 2)How do you confirm a dilapidations settlement once both parties have agreed a figure?

As soon as the figure is agreed verbally, I follow up in writing confirming the sum, the basis (full and final settlement of all dilapidations claims), and the payment deadline, obtaining written authority from my client before sending. A without-prejudice save as to costs letter is appropriate if costs remain outstanding; an open letter is used once all terms are settled. Payment is then monitored and chased if overdue.

Q (Level 3)You have been acting for a landlord in a dilapidations negotiation. The tenant has offered £60,000 in full and final settlement. Your schedule totals £95,000 but the section 18(1) cap is likely to be around £70,000. Your client wants to reject the offer and pursue the full £95,000. What do you advise?

Rule 3 requires honest advice even when unwelcome. I would advise that the section 18(1) cap is around £70,000, making the recoverable amount materially less than the £95,000 schedule total. A settlement at £60,000 is close to that cap; proceeding to litigation risks a lower finding plus the cost and delay of proceedings. I would set this advice in writing and ask the client to confirm their instructions. If they insist on rejecting the offer, I would record the instruction and continue to act, but not on the assumption that the full schedule is recoverable.