Building Surveyors in terminal dilapidations instructions often operate on an incentivised fee, sometimes up to 10% of the sum recovered or saving made.
This has its obvious problems, including inflated landlord schedules and tenant responses that are too low. The RICS has sought to address this.
Guidance from the RICS also covers the difficulties posed by a surveyor appearing in court when they are instructed on an incentivised fee.
If you're called to give evidence, the fact that you may be making ten pence in every pound that the court awards is likely to negatively impact on your credibility as an independent witness. It would also expose you to some tricky questions in cross examination.
Another problem, which isn't covered by the RICS but which should always be borne in mind, is the ability of a landlord to recover an incentivised fee from their tenant.
If a tenant is in breach of the lease, landlords can usually only recover reasonable losses (thus the cost of works is tendered to show that they are reasonable etc).
Incentivising a building surveyor's fee for terminal dilaps may be unreasonable and thus bar recovery. For example, on day 1 you open negotiations to settle a dilapidations dispute at £240,000. On day 2 the tenant offers £200,000. By day 3 everything is agreed at £220,000 (if only dilaps were that easy!).
A tenant might understandably be aggrieved at having to pay £22,000 for three days' work and challenge it on the ground that the fees were not properly and reasonably incurred. There is probably merit in that challenge, especially if a reasonable landlord wouldn't have agreed to such a fee arrangement in the circumstances.
Instructing surveyors on a contingent fee basis can often be a good idea. It limits costs and invests the building surveyor in the claim. There are, however, risks in doing so, especially if the dispute might go to court or ADR; careful consideration should be given before instructing on this basis.
Contributor
Associate & Solicitor Advocate
