Lavender is generally considered a hardy plant, but extreme conditions, such as drought, overwatering and even certain pathogens that attack its vascular system, may cause it to wilt.
Although lavender can adapt easily to dry conditions, underwatering a plant can cause its roots to wither and leaves to wilt. Never wait until wilting starts to water a plant, as the damage can quickly become permanent.
Overwatering a lavender plant can induce fungal growth, which can attack and kill the plant. Root rot, caused by the Fusarium genus, is a result of overwatering. Water deeply and less frequently, and allow the soil to dry between waterings to prevent this problem.
Several pathogens and fungal infections may cause a plant to wilt. These often spring up through overwatering or ground covering, such as a too-thick layer of mulch that traps moisture and warmth. Fungal infections may also occur on the underside of the plant as leaves die and compost. This can be avoided by trimming the undergrowth.
Vascular wilt occurs commonly in August and results from an infection that targets the vascular system of a plant. This is characterised by rapid wilting, browning and death. The only way to handle vascular wilt with lavender is to remove the plant, destroy it and watch other plants to ensure the infection doesn't spread.
Lavender can't compete with weeds or other plants in a crowded area, even once established. It's best to keep weeds clear of the plants, and to keep the plants a decent distance from each other, about 3-4 feet apart, to avoid overcrowding.