For many tied publicans, the day they hand back the keys should be a celebration. Instead, it often becomes a financial ambush. You are handed a Terminal Dilapidations Schedule—a bill for repairs that can easily hit £50,000 or more.
[Inference] Based on observed patterns, some Pub-Owning Businesses (POBs) use these bills as a “parting tax” or a deterrent to stop you from leaving or pursuing Market Rent Only (MRO) rights. But there is a powerful legal “shield” under the Landlord and Tenant Act 1927 that most publicans don’t know they have.
1. The “Diminution in Value” Rule (Section 18)
The most important thing to understand is that a landlord cannot legally charge you for “repairs” just to make money. Under Section 18(1) of the Landlord and Tenant Act, their claim is strictly capped at the actual loss in value to the property.
- The Cap: If a Pubco claims a roof needs £20,000 of work, but that work only increases the building’s value by £5,000, they can legally only claim £5,000 from you.
- The “Supersession” Defense: If the landlord plans to demolish, refurbish, or change the use of the pub after you leave, the repairs are “superseded” and their claim could be slashed to zero.
The “Income Stream” Myth
[Unverified] Industry experts often observe that Pubcos charge outgoing tenants for work that is never actually carried out. They simply pocket the cash and let the next tenant inherit the “Put and Keep” liability. Section 18 is designed specifically to prevent this “windfall”.
2. Spotting “Betterment” and Illegal Upgrades
A Dilapidations Schedule is often filled with “Betterment”—where the landlord tries to make you pay for a brand-new upgrade instead of a simple repair.
- Standard of Repair: You are generally only required to return the pub in the state it was in when you signed the lease (backed by your Schedule of Condition).
- Wear and Tear: You are not responsible for “fair wear and tear” unless your lease specifically says otherwise.
- The Upgrade Trap: If they ask for a modern, high-spec HVAC system to replace an old fan, that is an upgrade. You only owe them the value of the old fan.
3. Your 4-Step Defensive Plan
Do not let a BDM or a corporate surveyor bully you into signing a “Quantified Demand”.
- The 6-Month Rule: Under the Pubs Code, your POB must provide a Dilapidations Schedule at least 6 months before the end of your agreement. This gives you time to do the works yourself, which is almost always cheaper.
- Audit the Schedule: Cross-reference every item against your original photographic Schedule of Condition. If it was broken in 2015, you aren’t paying to fix it in 2025.
- Instruct a “Diminution Valuation”: If the bill is over £10,000, hire a specialist surveyor to produce a Section 18 Valuation. In one famous case, a £168k claim was slashed to just £25k by an independent valuer.
- Use Your SaaS Weapons: Data is your best defense.
4. How Smart Pub Tools Protects Your Exit
We didn’t just build a tool for the “good times”; we built it to stop you from being robbed on the way out.
- The Law Assistant: Use the Ultimate Pubs Code Law Assistant to download our “Dilapidations Challenge” templates. These letters use Sarah Havlin’s latest guidance and Section 18 principles to force your landlord to prove their “actual loss”.
- The Sunday Roast Shield: A profitable pub is harder to squeeze. By using the Sunday Roast Forecaster, you ensure your cash flow is strong enough to hire the right experts when the BDM comes knocking with a clipboard.
The Final Word
Dilapidations are as “certain as death and taxes,” but the amount you pay is entirely up to how well you are armed. Don’t let a Pubco turn your hard-earned exit into their next profit margin.