Craigard v Westbury Homes: dilapidations award cut to £648,141 after landlord fails to prove HVAC replacement was necessary

The Technology and Construction Court has awarded a landlord £648,141.47 on a terminal dilapidations claim pleaded at more than £1.6m, holding that it had not proved that replacing an office building's entire HVAC system was needed to remedy the tenant's breaches. In Craigard (Dartford) Ltd v Westbury Homes (Holdings) Ltd [2026] EWHC 2453 (TCC), HHJ Keyser KC found the system to be out of repair but assessed damages on the basis of repair rather than replacement.

The claimants bought the Dartford office building for £3.1m in 2021, with the lease expiring in July 2023. The first defendant was the tenant and the second defendant its surety. After expiry the claimants installed a new VRF and heat recovery ventilation system at a cost of £566,089.15 as part of a wider refurbishment. The defendants argued that remedial costs were far lower and that section 18(1) of the Landlord and Tenant Act 1927 capped damages.

The judge was critical of the defendants' side. He found that the failure to maintain the system was calculated, that works carried out days before expiry were minimal, and that a witness's claim that the system had operated satisfactorily was plainly false. Nonetheless, applying Ultraworth and Sunlife, he stressed that a tenant may perform its covenants in the least onerous way and need not deliver a new system. If a reasonable specialist could have recommended either repair or replacement, damages fall to be assessed on repair.

Neither engineering expert impressed him. The claimants' expert relied on unknowns to show that repair was unfeasible, risking a reversal of the burden of proof. The most reliable evidence was a costly, intrusive dilapidations report that itemised repair works, although the judge noted that its wording had been revised at the claimants' surveyor's request, replacing "end of economic life" with "not in repair". A project manager's report presented as contemporaneous was found to be a later reconstruction. He used the defendants' expert's repair figure of £163,504.

The judge accepted that the claimants had in reality decided to replace the system, pointing to communications with investors and sub-tenants and their environmental ambitions for the building. But he rejected the defendants' argument that repairs would have been superseded, describing it as contrary to well established law. Citing Marquess of Salisbury v Gilmore and Henderson v Thorn, he held that the common law does not extinguish damages because of a landlord's intentions. The second limb of section 18(1), on demolition and structural alterations, was agreed not to apply.

Consequential loss of rent was treated differently. Because the claimants would have incurred that loss regardless of any breach, nothing was awarded, although the ground floor loss would have been £44,130.38.

On building fabric, the judge largely preferred the claimants' surveyor. He allowed gutters (£59,601.44), the roof underfelt (£144,383), fascias and soffits, and carpets, the underfelt being a borderline breach. Window cleaning was not proved. Several electrical items, including fixed wiring and toilet heaters, were disallowed as improvements or for want of evidence. Professional and legal fees of £61,491 were recoverable under the lease indemnity.

On the statutory cap, he preferred the claimants' valuer's view that a hypothetical purchaser would have been content with a functioning HVAC system, but followed the defendants' valuer's general shortcut method. As the claimants' valuation assumed their own scope of works, the figures had to be revisited. The parties agreed the final sum after receiving the draft judgement, with interest and costs to be settled.

Andy Creer, instructed by Hamlins LLP, appeared for the claimants. Barnaby Hope, instructed by Knights Plc, appeared for the defendants.