Exiting an office is not just handing back the keys. The two line items that surprise teams most are dilapidations and business rates, because both can keep costing you after the day you leave. This plain-English office dilapidations and rates guide explains the rules, highlights the pitfalls, and gives you a plan to control the bill.
If you are weighing up lease exit against a flexible move, you can keep a live view of pricing across London using our office space in London listings. They sit alongside guides on timing and budget, such as our 40-day office timeline, which shows how to sequence the exit and the new start.
Key takeaways
- Your office dilapidations and rates guide starts on day one, not at lease end.
- Section 18 can cap a dilapidations claim to the loss in value.
- Use the Dilapidations Protocol to force clarity and reduce heat.
- Rateable value drives the bill, then multipliers and reliefs apply.
- Close rates fast at move-out, and avoid paying after you leave.
- Flexible space can bundle rates and remove most dilapidations.
What dilapidations really mean at lease end
Dilapidations are the works and costs a landlord claims to put the property back into the state required by the lease. On a full repairing and insuring lease, that can include reinstating alterations, repairs, redecoration and statutory compliance. The claim usually arrives as a Schedule of Dilapidations near the end of the term or after expiry. How you respond affects both the quantum and the timetable for exit.
Two ideas help keep claims in proportion. First, the landlord's loss is the point, not a wish list of works. Second, the process is a civil procedure, so it concerns matters. If you keep to the protocol and show evidence, the settlement tends to land closer to a fair figure than an opening list price. For an early budgeting context, our guide to the hidden costs of renting office space explains the non-rent items that can swell exit spend.
Section 18 cap and why it matters
There is a statutory cap on damages for disrepair. Section 18(1) of the Landlord and Tenant Act 1927 limits a landlord's damages to the diminution in value of the reversion, which means the true loss in the property's value because of the breaches, not the full cost of every item on a contractor's schedule, as set out on the legislation page for section 18. If the landlord plans to redevelop or refit, that can also reduce or even remove the loss.
Surveyors often test any works-based claim against a diminution valuation. Understanding this lever early can change how you scope, price and negotiate the exit works.
The Dilapidations Protocol in practice
Terminal dilapidations claims in England and Wales follow the Pre-Action Protocol for dilapidations. The protocol sets out the conduct the court expects before proceedings, including the Quantified Demand, the tenant's response and timescales, as explained in the Ministry of Justice's Dilapidations Protocol. Good conduct cuts friction and costs, and it reduces the risk of punitive outcomes if a dispute escalates.
For technical standards and format, surveyors also use the RICS guidance on dilapidations. The seventh edition covers schedules, Scott Schedules, diminution and settlement, and remains a practical benchmark, as set out in RICS dilapidations guidance.
A simple office dilapidations and rates guide
Business rates are a property tax on most non-domestic premises. The bill starts with the rateable value set by the Valuation Office Agency, then the government's multiplier is applied, and local reliefs are considered, which the government explains in its business rates overview. Both the rateable value and your liability dates can trip you up at exit, especially when the space sits empty or partly occupied.
If you are moving into a flexible space, you may prefer all-inclusive budgets, which can include rates and other overheads inside one monthly fee, as shown on our serviced office model page.
Rateable value, multipliers and reliefs
Rateable value is a rental value snapshot on a valuation date. Councils calculate the bill by multiplying the RV by the correct multiplier and then applying reliefs. A clear example of the calculation is set out in a VOA explainer on understanding business rates. The government also provides a current tool to estimate business rates.
At exit, two questions matter. First, who is liable on each date, especially around breaks and expiry? Second, whether empty property relief or other reliefs apply for the void. Getting those right prevents avoidable spend while you make good the space.
Check, Challenge, Appeal overview
If you think your rateable value is wrong, use the VOA's staged process. You must complete a Check before a Challenge, and appeals go to the Valuation Tribunal. The government sets out the process in its collection on how to challenge your business rates valuation, and the tribunal explains the next steps if you appeal on the Valuation Tribunal Service site.
The most common traps at exit
Exit traps tend to fall into three buckets: legal and notice mistakes, technical scope and pricing errors, and rate overspend during or after the move. Each is avoidable with planning and evidence.
Teams often focus on finding the next office and leave the outgoing lease to the last month. That drives rushed decisions and weak negotiation. Instead, start early, map the protocol steps, and decide when you will do work versus when you will negotiate for a cash settlement. If a landlord plans a refit, you may be able to rely on a diminution approach rather than full reinstatement.
Bigger claims often include items that were present on day one, which a solid schedule of conditions can guard against. If you do not have one, you can still test causation and value, but it is harder. When in doubt, get a building surveyor to inspect, cost and challenge the scope against the lease obligations and the actual end use of the building.
Legal & notice pitfalls
Missing a notice deadline on a break clause can keep the lease alive, which means rent, service charge and rates continue. Even when the break works, some clauses require vacant possession or reinstatement by the break date. Align your legal steps with the technical plan, and keep proof of handover and utility changeovers.
Where disputes look likely, stick to the Dilapidations Protocol timetable and format, and use the RICS guidance for structure and tone, as described in the RICS dilapidations guidance. Good process reduces noise and sets you up for a fair settlement.
Technical scope & pricing errors
A typical trap is accepting the landlord's contractor prices without testing alternatives. Another is reinstating fit-out elements that a landlord plans to rip out anyway. Use a surveyor to build a works-based alternative and a diminution valuation, then test which route gives the lowest real cost in money and time. If your team lacks bandwidth, our guide to hidden costs of renting office space lists the non-rent items that often swell exit budgets.
Rates overspend during and after move-out
Leaving the RV and occupation status unchanged can mean paying rates when empty. Tell the council about the change of occupation promptly, review entitlement to reliefs, and consider whether the valuation is still correct. If you plan to challenge the RV, line up evidence such as comparables, plans and business changes, as outlined in the government's challenge guidance collection.
Using flexible & serviced options to cut risk
Serviced and managed options change the risk profile at exit. With an inclusive licence, rates are usually bundled into the fee, and dilapidations exposure is minimal, because you do not carry a full repairing lease. For many firms, that reduces the chance of a large end-of-term bill and makes budgeting simpler.
You can sense-check budget impacts for different team sizes using our office space calculator. When a full lease is not the best fit, we can show spaces where rates, utilities and cleaning sit inside one predictable monthly price, as reflected in the serviced office benefits page.
When inclusive models beat a full lease
Inclusive models shine when teams plan change, for example, a future headcount swing or a likely re-stack. They also remove the need to project and recover a dilapidations budget. If your headquarters still needs a bespoke lease, consider a shorter term with options, robust condition records, and clearer reinstatement carve-outs.
A practical 6-to-0 month exit plan
The best defence against traps is a dated plan. Start six months out if possible. Map legal steps, technical scope, landlord engagement and rates actions. Tie them to your move-in timetable so you do not pay twice for too long.
At six months, read the lease and break clause in full, flag reinstatement duties, and commission a dilapidations survey. Decide what you will reinstate and what you will contest. At three months, line up contractors, agree on method statements, and notify the landlord. In parallel, set up the new address, transfers and IT so you can safely deliver vacant possession.
Exit checklist, six to zero months
- Read the lease, break clause and licences, then write a one-page obligations summary.
- Commission a building surveyor to scope works and test a diminution route alongside works pricing.
- Build your Quantified Demand response template with evidence slots.
- Notify the council of changes in occupation and map reliefs for the void period, using the business rates overview as your reference.
- Decide a rates strategy: accept, check, or challenge, guided by the VOA's Check, Challenge, Appeal steps.
- Freeze aesthetic spend on the outgoing space so you do not improve it for the next tenant by accident.
- Align exit works with your move plan using our 40-day office timeline.
- Photograph and log condition at handover, including meter readings and keys.
Negotiating smarter: evidence that moves numbers
Evidence changes outcomes. For dilapidations, test each item against the lease wording, the condition at the start, and the landlord's plans. Use works pricing from more than one contractor, and compare the total to a diminution valuation. If the landlord would not suffer real loss because of redevelopment, the Section 18 cap is your anchor, which is set out in section 18 of the 1927 Act. For process and document format, align with the RICS guidance for dilapidations.
For business rates, collect floor plans, photos, comparable assessments and any material changes that affect value, then work through the VOA's steps. The government's collection on challenging your business rates explains the order and the evidence to assemble. If a challenge fails and you still believe the RV is wrong, the Valuation Tribunal route is described by the Valuation Tribunal Service.
If you want a view on how rates may change next cycle for London, our article on business rates 2026 for London HQs explains the timeline and how to prepare evidence ahead of draft lists.
Conclusion
Exit costs can be managed with early action. Use this office dilapidations and rates guide to set your plan, keep to the protocol, and move fast on rates liability. If a full lease still suits your HQ, sharpen the terms and record the condition well. If flexibility is the goal, look at models that bundle rates and remove most dilapidations risk, starting with our serviced & managed options in London.
FAQs
What is a fair discount on a landlord’s opening dilapidations claim?
There is no set percentage. The right figure depends on the lease wording, condition at the start, causation and the landlord's plans. Section 18 caps damages at the loss in value, not simply the cost of works, as shown in section 18 guidance on legislation.gov.uk.
Can I end up paying business rates after my team has left?
Yes, if the lease is still live or you have not updated the council on the occupation status. Empty property relief may apply, and your rateable value may be challengeable, as set out in the government's business rates overview.
Should I do the exit works or offer a cash settlement?
Test both. Price the works and compare the total to a diminution valuation. If the landlord plans a refit, a diminution approach often reduces the true loss. Format and process are set out in the RICS dilapidations guidance.
How early should I start the exit process?
Six months is sensible for a standard office, and longer for complex fit-outs. Align legal steps, technical scope and rate actions with your move plan, using a dated sequence like our 40-day office timeline.
Will a serviced office remove dilapidations risk?
Serviced licences usually mean minimal dilapidations exposure and one monthly fee that often includes rates, which you can compare with our overview of managed office space. Always check inclusions in the proposal.
