Ireland Dilapidations & the Section 18(1) Cap

A dilapidations claim under an Irish commercial lease is the landlord's end-of-term bill for tenant breaches of the repairing, decorating, and yielding-up covenants — and on a typical FRI lease the headline number routinely lands between €40,000 and €150,000, with larger industrial and retail premises producing claims well above €250,000. Section 18(1) of the Landlord and Tenant Act 1927 — which applies in Ireland in substantially the same form as in England and Wales — caps the landlord's recoverable damages at the diminution in the value of the reversion, meaning the actual reduction in the property's market value caused by the breaches, not the cost of repairs. The gap between the headline claim and the recoverable amount is often 50–80%, and the tenants who realise this saving are those who plan for the dilapidations process 12 months before lease expiry, not the ones who first read the schedule when it arrives.

What dilapidations means in Ireland

Under an Irish FRI lease (the standard structure for almost all commercial leases) the tenant typically covenants to keep the demised premises in good and substantial repair, redecorate internally and externally at specified intervals (typically every 5 years and in the last year of the term), comply with statutory requirements, reinstate tenant alterations on yielding up, and hand the premises back in repair and free of tenant chattels.

The landlord's surveyor produces a Schedule of Dilapidations in the final 6–12 months of the lease (or after expiry) listing every alleged breach with a costed remedy. A typical Dublin office schedule for a 3,500 sqft (325 sqm) Grade B premises runs to:

• Interior redecoration — €18,000–€28,000
• HVAC reinstatement/servicing — €12,000–€25,000
• Carpet, ceiling, and lighting replacement — €15,000–€35,000
• Removal of tenant partitions and fit-out — €20,000–€60,000
• Statutory compliance (EICR, asbestos register update, fire safety) — €4,000–€10,000
• Decorations and patching to common parts (multi-let buildings) — €3,000–€8,000

The headline claim therefore lands at €72,000–€166,000 before negotiation. This is what arrives in the tenant's office, usually 2–4 months before lease expiry.

Section 18(1) — the statutory cap

Section 18(1) of the Landlord and Tenant Act 1927 (which applies in Ireland in the same form as enacted by the Irish Free State and never repealed) provides that damages for breach of a covenant to repair are limited to "the amount by which the value of the reversion in the premises is diminished owing to the breach."

The cost of repair is evidence of the diminution in value, but it is not the cap itself. The actual recoverable damages are the difference between:

• (A) the market value of the property at lease end as it actually is, and
• (B) the market value of the property at lease end as it would have been if the tenant had complied with the repairing covenants

If those values are similar — because, for example, the landlord is going to refurbish the property anyway, demolish it, redevelop, or let it to a tenant who will gut and refit — the diminution is small or nil, regardless of how high the cost-of-works number is.

In practice, the tenant instructs an independent chartered surveyor (RICS or SCSI registered) to value the property in current condition vs. covenanted condition. If the landlord has committed to refurbishment, demolition, or a refit by a new tenant, the valuation reflects that as the comparable. Recoverable damages are then capped at the lower of (a) cost of works and (b) the diminution figure.

Irish case law on Section 18(1) is less developed than English authority but follows the same principles. The English authorities — particularly Salisbury (Marquess) v Gilmore [1942], Sun Life Assurance plc v Racal Tracs Ltd [2000], and the Court of Appeal decisions in Mason v Totalfinaelf UK Ltd and Latimer v Carney — are persuasive and routinely cited.

When Section 18(1) wipes the claim out — and when it doesn't

Section 18(1) is most powerful where the landlord:

• Has applied for planning permission to refurbish or redevelop — the planning record is public and devastating to a cost-of-works claim
• Is marketing the property for redevelopment or sale to a developer — agent particulars are evidence
• Has agreed terms with a new tenant who will refit — pre-let documents are evidence
• Is taking the property back into vacant ownership for owner-occupier use with a different specification

Section 18(1) provides little or no defence where the landlord:

• Intends to re-let to a similar tenant on similar terms in the same condition
• Has already started the works themselves and has documented costs
• Has a covenant tenant queuing for the premises in current condition

For a Dublin Grade C office building that the landlord is about to refurbish to Grade B — a very common scenario in 2025–2026 — Section 18(1) routinely caps a €120,000 dilapidations claim at €20,000–€40,000. The savings to the tenant are substantial and the legal cost of running the defence (surveyor's valuation, solicitor's correspondence) typically runs €8,000–€18,000 — a strong return on investment.

Schedule of Condition — the first line of defence

The single most cost-effective protection against dilapidations is a Schedule of Condition annexed to the lease at grant. This is a photographic and written record of the premises' condition on the day the tenant takes occupation, with the repairing covenant expressly qualified by reference to it.

The economic effect: the tenant is liable only for damage and deterioration beyond what is shown in the Schedule. Pre-existing defects, pre-existing wear, and the building's age-related condition at grant are removed from the dilapidations exposure entirely.

A proper Schedule of Condition is prepared by an SCSI- or RICS-registered chartered building surveyor, includes photographs of every room/elevation/service and existing defects, is reviewed and signed by both parties before lease execution, and is annexed as a numbered schedule with cross-reference in the repairing covenant.

Cost: €1,800–€4,500 for typical small Irish commercial premises. Downstream dilapidations saving: typically €25,000–€80,000 over a 10-year lease term.

The repairing covenant should read substantially: "to keep the demised premises in no worse repair and condition than as evidenced by the Schedule of Condition annexed hereto." See the FRI entry in the glossary and the clause library.

The renunciation deed — and why it matters for dilapidations

Under the Landlord and Tenant (Amendment) Act 1980, business tenants who have occupied for 5+ years and met the "business equity" test have statutory rights to a new tenancy at expiry. These rights — known colloquially as 1980 Act renewal rights — are waived only by a properly executed renunciation deed signed before the lease commences, with the tenant having received independent legal advice.

The interaction with dilapidations:

• A tenant who has not renounced 1980 Act rights and intends to renew their lease has a strong negotiating position on dilapidations — the landlord cannot threaten to pursue a money claim against a tenant who is simply going to take a new lease anyway.
• A tenant who has renounced 1980 Act rights, or who is choosing to vacate, faces the dilapidations claim head-on with no renewal leverage.

Confirm renunciation status at the outset of every Irish commercial lease — a properly drafted renunciation deed is irreversible and forecloses the statutory renewal protection. See the Ireland jurisdiction guide for the broader statutory framework.

VAT, the Capital Goods Scheme, and dilapidations

Most Irish commercial leases are subject to a "landlord option to tax" — meaning VAT at 23% is charged on rent and on any dilapidations settlement. The VAT treatment of dilapidations is:

• A negotiated cash settlement is typically subject to VAT
• Tenant-performed remedial works (where the tenant does the work themselves rather than paying cash to the landlord) are typically outside the scope of VAT for the landlord
• The Capital Goods Scheme can create unexpected VAT recovery issues on long leases — get accounting advice before agreeing the form of settlement

For tenants who can perform the works themselves (typically larger occupiers with in-house facilities teams), the VAT differential between cash settlement and works-in-kind can be €10,000–€30,000 on a typical claim.

The RICS / SCSI Dilapidations Protocol

The RICS and the Society of Chartered Surveyors Ireland (SCSI) publish a Dilapidations Protocol setting out expected procedural steps. It is not legally binding but courts give weight to compliance. The protocol expects:

1. Schedule of Dilapidations served 56 days before lease end (or as soon as possible after)
2. Quantified Demand within 56 days of lease end setting out the cost claim
3. Response by tenant within 56 days of receipt including any Section 18(1) defence
4. Without prejudice settlement discussions for at least 28 days before any litigation
5. Joint expert appointment where the parties cannot agree

A tenant who responds informally without engaging the protocol — or worse, who ignores the schedule and hopes it will go away — typically settles at 75–90% of the headline claim. A tenant who runs the protocol formally, with a valuation, settles at 25–50% of the headline. The difference is professional advice well spent.

Negotiation tactics during the term

The five highest-impact dilapidations strategies, in order of value:

1. Schedule of Condition annexed at grant — the highest-ROI protection available.
2. Mid-term inspections every 18–24 months — remedying issues during the term costs 30–40% of what remedying them at lease end costs.
3. Document landlord plans for the property — track planning applications, marketing materials, and any indication of repositioning. This is your Section 18(1) evidence.
4. Reinstatement scope agreed in the licence to alter — specify exactly which alterations must be removed at expiry, which can remain, and at whose expense.
5. Pre-expiry surveyor's report 6–9 months ahead of term end — your starting position against the landlord's schedule.

How BizLeaseCheck helps

BizLeaseCheck reads your Irish commercial lease, identifies whether it is FRI or IRI, flags whether a Schedule of Condition is annexed, confirms renunciation deed status under the 1980 Act, and surfaces every clause that affects your dilapidations exposure. The report identifies which clauses can be negotiated before signing and explains the Section 18(1) defence in plain English. See a sample report or upload your Irish lease for a free preview.

Not legal advice. Irish dilapidations law has substantial overlap with English authority but procedural differences matter and Section 18(1) defences depend on building-specific valuation evidence — use the BizLeaseCheck report to identify issues for discussion with a qualified Irish solicitor and chartered building surveyor before signing or before any dilapidations claim is received.