What Are Green Dilapidations?
Green dilapidations refers to the integration of environmental and sustainability considerations into the dilapidations process at the end of a commercial lease.
Traditionally, dilapidations are about a tenant returning a property to its original condition (or complying with lease covenants for repair, decoration, reinstatement). But green dilapidations challenge that by asking:
“Is it environmentally responsible or necessary to reinstate or repair everything, especially if the works will be undone by the next tenant?”
Key Principles of Green Dilapidations
- Avoiding Wasteful Works
- Reconsider whether reinstating removed features (like carpet, lighting, partitions) is meaningful if the next occupier will strip them out again.
- Aim to minimise unnecessary strip-outs and reduce landfill waste.
- Energy Efficiency Considerations
- Encourage sustainable upgrades instead of like-for-like reinstatement of older, less energy-efficient systems.
- Consider whether improvements to HVAC, insulation or lighting align with EPC (Energy Performance Certificate) obligations.
- Collaborative Approach
- Landlords and tenants should work together to agree a more environmentally conscious settlement.
- This may involve financial settlements in lieu of physical works where beneficial.
- Sustainable Materials and Methods
- Where works are carried out, aim to use low-impact materials, local sourcing, and green-certified contractors.
- Include BREEAM or LEED standards where relevant.
- Alignment with ESG Policies
- Many institutional landlords and occupiers now have internal ESG targets that green dilapidations can support.
- These may influence decisions on repairs, waste, energy use, and carbon reporting.
Why Green Dilapidations Matter in the UK
- Legal Evolution: While the Party Wall Act and standard lease covenants still apply, the sector is seeing a cultural shift where “green clauses” and sustainability discussions are entering Heads of Terms and leases.
- Regulatory Pressure: Minimum EPC ratings are tightening (currently EPC B by 2030), so retrofitting inefficiencies into reinstated works is increasingly counterproductive.
- Market Demand: Tenants and investors alike are demanding greener buildings and more sustainable property practices.
Examples of Green Dilapidations Scenarios
- A tenant removes an energy-efficient LED system and is asked to replace it with the older system they had originally removed.
- A landlord accepts a financial settlement to allow the next tenant to keep modifications that align with their fit-out plans.
- A dilapidations schedule is adjusted to avoid reinstating elements that would immediately be stripped out again.
A Final Thought
Green dilapidations is not a legal term but a practical, evolving mindset. It requires collaboration, common sense, and sustainability awareness, benefiting not only the environment but also cost, efficiency, and reputational value.
If you have any questions please contact the office, we’ll be pleased to help.
