Diminution in Value
Diminution in Value refers to the loss of value, if any, in the property that was leased due to the dilapidations. According to legislation, a landlord’s damages, or compensation, for dilapidations is capped at the lower of the Cost of the Remedial Works, or the Diminution in Value.
This is because in most jurisdictions in the UK & Ireland, a statutory legal cap limits a landlord’s damages for dilapidations to the lower of the Cost of Remedial Works, or the effect (if any) on the property’s value.
The legislation does vary depending on what region of the UK & Ireland you are in, so do not hesitate to get in touch with us for more information.
Of the many distinct disciplines of chartered surveyor, two are required for the purposes of the Diminution in Value dilapidations procedure.
It is the chartered building surveyor who identifies required repairs and prices their remedy, and the chartered valuation surveyor who assesses to what extent (if any) these items impact the property’s freehold value.
The chartered valuation surveyor is also known as a ‘general practice surveyor’ and a ‘valuer’.
When is a Diminution Valuation Required?
For a tenant, a Diminution Valuation by a chartered valuation surveyor is recommended no later than the point when your chartered building surveyor advises that the Cost of Remedial Works figure has been negotiated to the lowest achievable level.
Because the impact on the value of the property is commonly far less, a reliable Diminution Valuation is required to make a strong case.
Whilst the Diminution in Value cap may appear to be more in favour of tenants than landlords, there are situations in which a landlord will be well served by commissioning their own Diminution in Value report:
How is Diminution in Value Assessed?
Loss of Rent
What We Do
The role of the chartered valuation surveyor in securing the correct outcome in dilapidations negotiations should not be underestimated – yet is often carelessly overlooked.
Commonly, the impact of the necessary repairs on value is considerably less than the cost of fixing them. As a result, the tactical employment of a trusted valuer could save you significant sums by taking the Diminution in Value dilapidations approach.
We are unique in our provision of both types of chartered surveyors for dilapidations negotiations.