Section 18 (1) Valuations

Our expert team provide valuations under Section 18 (1) of the Landlord and Tenant Act 1927 to calculate the compensation payable resulting from a failure to meet contractual obligations.

Section 18 (1) or a Diminution Valuation

Acting on behalf of Landlords and Tenants, our RICS Chartered Surveyors and Registered Valuers have experience in the specialist form of valuation relevant in the assessment of damages resulting from breaches of repairing covenants under Section 18 (1) of the Landlord and Tenant Act 1927.

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Section 18 (1) is a reference to the Landlord and Tenant Act 1927. It is a statutory provision which enables valuations to be prepared to assess the loss in value to a Landlord’s interest in a property because of repairs not being undertaken by a Tenant. It provides a statutory cap for damages by calculating the ‘diminution in value’.

There are two parts (limbs) to Section 18 (1):

  • The first limits the claim to the amount the value of the Landlord’s reversion is diminished due to breaches of the covenant to repair. The Landlord cannot recover more than it has cost, in terms of the loss caused to the value of the property. This is the diminution in the property’s reversionary value, caused by the disrepair.
  • The second limb states no damages are recoverable if it can be shown the premises would, at or shortly after termination of the lease, be demolished or altered to the extent it would render valueless the repairs in question.

This is a legal term used to refer to the reduction in value of the Landlord’s interest, because of a Tenant’s breach of lease covenant.

A Schedule of Dilapidations sets out the items of disrepair at a property caused by a Tenant’s failure to perform its repairing, decorating, and where appropriate, reinstatement obligations in the lease. A Schedule of Dilapidations is typically prepared by a qualified Building Surveyor.

Whether acting for Landlord or Tenant, the valuer should carefully analyse the Schedule of Dilapidations and consider which matters constitute repair, and which will impact a property’s value; it is important to note Section 18 (1) relates only to matters of repair.

To calculate the diminution in the Landlords interest, two valuations are required. The first is an assessment of the property’s value in its present condition. The second is what the property would have achieved in the open market, if it had been maintained by the Tenant, in accordance with the terms of the lease. The second valuation is a hypothetical assessment considering all potential uses for the premises. The difference between the two valuations is the diminution in value. If the diminution is less than the cost to the Landlord of doing the works, the Landlord can only recover the lower figure.

Our expert team have experience with the legal and valuation issues that affect assessments for damages. Working closely with our team of Building Surveyors, we undertake this specialist area of work across the Southwest. 

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