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.

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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.

Section 18(1) Valuations

A Section 18(1) Valuation assesses the extent to which a landlord’s interest in a property has been diminished as a result of a tenant’s failure to comply with repairing obligations under a lease. The valuation establishes the statutory cap on damages recoverable for disrepair and is a fundamental component of many dilapidations disputes.

The principle derives from Section 18(1) of the Landlord and Tenant Act 1927, which limits a landlord’s claim to the reduction in the value of their reversionary interest caused by the disrepair. Importantly, the assessment relates solely to breaches of repairing covenants and does not extend to decoration, reinstatement or alteration liabilities.

The Importance of Specialist Expertise

A robust Section 18(1) assessment typically requires input from both Building Surveyors and Valuation Surveyors. Building Surveyors identify and quantify the items that constitute disrepair, distinguishing them from issues relating to decoration or reinstatement. Valuation Surveyors then assess the effect of that disrepair on the property’s value.

The valuation exercise involves determining:

The value of the property in its actual condition at lease expiry.
The value of the property had it been maintained in accordance with the repairing obligations contained within the lease.

The difference between these two values represents the diminution in value. In many cases, this figure may be lower than the estimated cost of carrying out the repairs, thereby limiting the damages recoverable by the landlord.

The Two Limbs of Section 18(1)

Section 18(1) contains two distinct considerations.

Diminution in Value

The first limb concerns the reduction in value of the landlord’s reversionary interest resulting from the tenant’s breach of covenant. This assessment is based on market evidence and valuation principles, rather than the landlord’s personal intentions for the property.

Supersession

The second limb considers whether the landlord’s intended actions would render some or all of the repair works unnecessary. Commonly referred to as “supersession”, this principle prevents a landlord from recovering damages for items of disrepair that would be overtaken by redevelopment, refurbishment, demolition or other planned works.

For example, where a landlord intends to substantially redevelop a property following lease expiry, certain repair items may have no impact on the value of the landlord’s interest and may therefore be excluded from the claim.

How Vickery Holman Can Help

Section 18(1) valuations are often highly complex and require a detailed understanding of both building pathology and valuation methodology. At Vickery Holman, our Chartered Building Surveyors and RICS Registered Valuers work collaboratively to provide robust, evidence-based Section 18(1) assessments for landlords, tenants, solicitors and property professionals.

Our experience across commercial, industrial, retail, leisure and specialist property sectors enables us to deliver clear, defensible advice that supports negotiations, dispute resolution and expert witness proceedings where required.

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Section 18 (1) Valuation FAQs

What is a Section 18 (1) Valuation?

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.

What is Diminution in Value?

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.

What is a Schedule of Dilapidations?

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.

How Is a Section 18 (1) Valuation Calculated?

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.

Dear Rebecca. Thank you for the thorough valuation you did for us. It's the most detailed document l have experienced in my many years in business. Thanks again.

Great people, they understood my needs as a customer and their professional obligations and struck the right balance. It was very good dealing with your company as it made my difficult circumstances manageable. I had dealt with other firms who I found condescending and dismissive of the customer because they had been paid anyway. Thanks again for running a well organised firm who I would recommend any day.

Responses were swift, valuer was approachable and happy to discuss our requirements.

I have been very impressed by the speed and efficiency of your service. It was a great pleasure to meet Sam to explain the background and the basis of the valuation request. The figure you have arrived at makes sense to me and allows us to move forward on a solid foundation.

I have read through your very comprehensive and professional report/valuation. Your valuation is much in line with our expectations and is a reassuring figure. I appreciate your proactivity and support and know who to turn to in the future should we extend our Commercial Property portfolio.

Christie was a lovely person to work with and we appreciated her timely submission of the report and her guidance and communication throughout the whole process. Thankyou.

Sam provided a detailed and carefully considered valuation of some unusual properties that will prove exceptionally helpful when the executors report to HMRC.