A Princely Sum – Dilapidations and Compensation on the Surrender of the Lease of Royal Lodge

The press release dated 9th October 2026 issued by the Crown Estate (found here: The Crown Estate confirms the surrender of the lease for Royal Lodge) advises that the lease of Royal Lodge has now been surrendered, and that its claim as landlord for dilapidations against Andrew Mountbatten-Windsor as tenant totalled £1.8m. The press release also advised that under the terms of the lease the tenant was entitled to circa £302,000 in compensation, resulting in a net figure of being £1.5m being received by the Crown Estate in respect of the dilapidations, which the BBC reports has been paid by the King from his own private income.

But what do these terms actually mean, and are claims for dilapidations (made by landlords) and compensation (made by tenants) unusual at the end of a lease?

Put simply, dilapidations are items which are in disrepair and which, under the terms of the lease, the tenant was under an obligation to repair, maintain, decorate or otherwise look after during the term of a lease.  If a property is returned to the landlord in a poorer condition than required by the lease, the landlord may seek compensation for the loss attributable to the disrepair.  The amount of compensation is usually calculated by reference to the cost of remedying the dilapidations (save that the amount of compensation is capped by the reduction in the value of the property caused by the disrepair).

In leases of commercial property, dilapidations claims are very common and often form a significant part of lease-end negotiations. They can also arise in residential settings where the length of the lease term is significant; in the case of Royal Lodge it is reported by the BBC that the term was 75 years.

Dilapidations are usually ascertained by a surveyor inspecting the let property close to but before the end of the lease. The surveyor would usually prepare a schedule of dilapidations to record his or her findings. This schedule can then be compared against the tenant's obligations under the terms of the lease, as well as any schedule of condition which was prepared at the start of the lease term to record the state of the property at that time.

Tenant compensation is, broadly speaking, compensation that a tenant may be entitled to receive from a landlord in certain circumstances.

The basis for such claims can vary. In some cases, a tenant may have carried out improvements to a property with the landlord's knowledge and permission or have rights under the lease that give rise to compensation when the tenancy ends.

The Crown Estate's press release advises that there was a mechanism in the lease which provided that, should the lease be surrendered in the first 25 years of the 75-year term, the tenant, Andrew Mountbatten-Windsor, would be entitled to compensation. The BBC reports that this amount reduced for each of those initial 25 years that the lease continued. This was, as the press release states, due to Andrew Mountbatten-Windsor having spent in the region of £7.5m on refurbishments at the start of the lease. The amount spent on refurbishments by Andrew Mountbatten-Windsor was in lieu of paying a monthly rent, according to the BBC.

The press release states that the National Audit office has confirmed that "the Royal leases were informed by independent, professional valuations and that the prices agreed were within the recommended valuation ranges."

For leases of commercial property, it is not unusual for there to be an express agreement regulating how improvements are dealt with at the end of the lease. It is, however, rare (although not unheard of) to see this type of mechanism used in a lease of residential property, especially where the term of the lease is long and substantial works are being carried out by the tenant at the outset of the lease with the landlord's authority.

The best time to manage dilapidations risk is often at the start of the lease rather than at the end.

Both parties should:

• ensure repair and maintenance obligations are clearly drafted in the lease and understood by the parties;
• ensure a schedule of condition is prepared to record the condition of the property before the tenant takes occupation and making sure this is attached to the lease itself;
• keep records of the property's condition throughout the term, including any works requested by the tenant and whether permission was granted by the landlord;
• review potential claims well in advance of the end of the lease; and
• obtain professional advice at an early stage, especially where significant works or disagreements are anticipated.

The Royal Lodge story has attracted headlines because of the individuals involved, but the underlying issues are familiar to landlords and tenants across England and Wales.

Dilapidations claims and tenant compensation claims are not unusual, and can have a material financial impact at the end of a lease. Although every lease is different, careful drafting at the outset, maintaining good records during the term and understanding the property's condition through a schedule of condition prepared before the start of the lease can significantly reduce the scope for disagreement later on.

At Wilsons, our experts in our Property Department are regularly instructed to prepare and negotiate commercial and complex residential leases, reducing the scope for disagreement down the line.  Where however disputes do issues arise, our experts in our Property Litigation Department are on hand to assist.