Update: repairs

Obligation to repair

Two recent court decisions highlight once again the problems that can be caused by poor drafting in respect of repair obligations.

The case of Delgable v Perinpanathan [2006] 17 EG 114 concerned a property in Paddington, London. The landlord of the property held a headlease under which it covenanted to repair the whole property. Under a sublease of the first, second and third floors of the property, the tenant covenanted in similar terms to repair the premises demised by the sublease. Both leases also contained respective tenant obligations to pay to their respective landlord a fair portion of the expenses incurred by the landlord in preparing and maintaining walls, fences and 'any other things the use of which is common to the premises and any other property adjoining or near thereto'. The court interpreted this as meaning that the roof was not demised by the sublease and therefore fell within the landlord's repairing obligations under the headlease. However, the tenant was obliged to make a 60 per cent contribution to the cost of the repair work.

Marlborough Parks Services v Rowe [2006] 23 EG 166 concerned a residential complex in Washington, Tyne & Wear. The leases of the flats on the complex defined 'flat' as including 'the joists and beams on which the floors are laid together with all the floors'¦ exclusively serving the flat'. The tenants covenanted to keep their flats in good and tenantable repair. The landlord, for its part, covenanted to maintain the 'main structure' of the complex. Cracking appeared in the walls of one of the flats caused by the deflection of wooden floor joists within the flat. The joists not only supported the floor, but also provided support for partition walls. The court held that the obligation to repair fell on the landlord. It approved the approach in Irvine v Moran [1991] 1 EGLR 261, in which it was said that 'the structure' consisted of those elements that gave a building its essential appearance, stability and shape and was not limited to those aspects that were load-bearing, but extended to those elements which were materials of significance in the overall construction.

Janet Reger International v Tiree [2006] 30 EG 102 (CS) covers similar ground to the decision of Post Office v Aquarius Properties [1987] 1 EGLR 40. In Janet Reger, a ground floor and basement shop was let in Beauchamp Place, London SW3 under a lease that required the landlord to maintain the structure. The structure of the property was excluded from the tenant's demise and the tenant covenanted to keep the demise in good and substantial repair. Following a damp problem caused by a defective damp-proof course, the tenant had to vacate and seek alternative premises. The landlord was prepared to rectify the problem, but denied liability for the defect. The tenant commenced proceedings for specific performance of the landlord's repair covenant, along with damages. The court held that a landlord's obligation to repair arose when the subject matter of the covenant had deteriorated from some previous condition so that it had fallen below a standard that a reasonably minded tenant would expect under a lease. In this case, there was no evidence of a deterioration in the damp-proof course. Rather it had been incorrectly installed in the first instance. The court further refused to imply a term into the lease as it was of the view that such an implied term was not necessary to give business efficacy to the lease.

PRP Architects v Reid [2006] EWCA Civ 1119 is an interesting example of the imposition of liability for disrepair by statute. A firm of architects were tenants occupying office accommodation on the second floor of a building in Smithfields, London. The architects were held to be liable, under the Provision and Use of Working Equipment Regulations 1998, to an employee who suffered injuries after her hand was caught in the lift doors. The court did make the point that the architects' lease gave them a right to force the landlord to repair and maintain and renew the lift if necessary.

Damages

In Bella Casa v Vinestone [2005] EWHC 2807 (TCC), a landlord agreed to grant a long lease to a tenant and also agreed to carry out certain refurbishment work. However, the works were not properly completed and were defective. The tenant sought to recover damages from the landlord and its contractors for breach of statutory duty under the Defective Premises Act 1972. The court rejected the tenant's claim for consequential losses in respect of interest on the purchase price, as claims for damages for loss of use were usually assessed by the making of an allowance for the loss of enjoyment; calculation by reference to interest on the purchase price of the property was contrary to the usual approach. But the court accepted that the tenant's claims for service charges and utility bills paid might be recoverable if they had been incurred without any tangible benefit because the property was not fit for human habitation during the relevant period.

Earle v Charalambous [2006] 42 EG 245 (CS) involved a block in Islington, London. The landlord of the block breached its repairing obligations under the long lease of one of the flats which resulted in water ingress to the flat. The tenant claimed damages. In assessing damages, the court considered two periods of disrepair: the first, of 35 months' duration, during which the tenant remained in occupation; and the second, of 21 months' duration, during which the tenant lived at his parents' home. The court made the point that a long lease of a residential property was not only a home, but was also a valuable property asset. If a breach of covenant had the effect of depriving a lessee of enjoyment of the asset, wholly or partially, for a significant period, a notional judgment of the resulting reduction in rental value was likely to be the most appropriate starting point for the assessment of damages. The court awarded damages for the two periods of £13,500 and £10,000, respectively.

Latimer v Carney [2006] 45 EG 191 (CS) was a case about a shop with first-floor residential accommodation in Manchester. At the expiration of the lease, the tenant of the property had vacated and, in breach of their repairing covenant, left it in disrepair. The landlord made a claim for damages, putting forward the report of a chartered surveyor that detailed the condition of the premises and gave an estimate of the costs of repair. The property was subsequently re-let, but only after undertaking refurbishment works required by the new tenant. At trial, the tenant argued that the burden was on the landlord to prove it had suffered a diminution in the value of its reversion for the purposes of s 18(1) of the Landlord and Tenant Act 1927 and that, as the landlord had failed to adduce any evidence of the actual cost of repairs, it failed to discharge that burden. The court held that the surveyor's report that contained the estimated costs for repairs was sufficient evidence in this regard. The fact that the landlord had undertaken some refurbishment work at the request of the new tenant did not mean it had suffered no loss as a result of the tenant's breach. The court said that, in view of the uncertainty as to the effect of the disrepair on the value of the landlord's reversion, a discount of 60 per cent should be applied to the costs identified in the surveyor's report.

Service charges

The question of reasonableness features highly in the following two cases on repairs in the context of service charges.

In Continental Property Ventures Inc v White [2006] 16 EG 148, a dispute arose between the landlord and the tenant of a flat in a residential block in Buckingham Gate in central London. The dispute related to two repair items. It was found by the Lands Tribunal that it was unreasonable for the landlord to carry out damp-proofing works at a cost to the lessees of the block when he could have, at no charge, relied on the guarantee but failed to do so; so these costs were irrecoverable by the landlord. The second matter concerned the landlord's failure to have leaking pipes repaired in good time. The Lands Tribunal said that, in determining whether the landlord's expenditure had been reasonably incurred and was payable by the lessees, it could take into account the fact that the landlord's failure was a breach of obligation, the damages payable in respect of which could give rise to an equitable set-off that could be put forward in defence of the landlord's service charge claim. The question of set-off was an issue that s 27A of the Landlord and Tenant Act 1985 gave the Tribunal jurisdiction to determine.

Princes House v Distinctive Clubs [2006] All ER (D) 117 (Sep) concerned a commercial block in Piccadilly, London. The property had a defective roof that needed substantial works of repair. The landlord let the basement and ground floor of the block to an incoming tenant who was aware of the roof defects. The letting was on the basis that the landlord was to use all reasonable endeavours to provide services to the block, including repair of the roof, and the tenant was to enjoy a service charge cap for some five years. For various reasons, the roof works were not commenced until after the service charge cap period had expired and the landlord sought to recover from the tenant a share of the cost of the repair work. The tenant contended that the works undertaken were not properly recoverable as repairs and also that the landlord had failed to fulfil its obligation to use all reasonable endeavours to complete the roof repair works before the end of the cap period. The court held that some, but not all, of the works undertaken were justifiable repairs; some of the work represented improvements and were not recoverable under the service charge. However, the court said that the landlord had breached its obligation to use reasonable endeavours and, as a consequence, could not recover any of the costs of the roof from the tenant.

Break clauses

In Fitzroy House Epworth Street (No. 1) v Financial Times [2006] 19 EG 174, a tenant occupied an office block in the City of London under a lease that contained a break clause that allowed the tenant to terminate if it had on the break date 'materially complied' with all its obligations under the lease. The tenant gave notice to the landlord to terminate within the requisite period and then undertook a substantial repair programme in order to comply with its covenants. It offered the landlord facilities for inspection before, during and after the works were carried out, but the landlord did not take up the offers. On the completion of the works, the tenant vacated. The landlord claimed that the tenant had 'materially failed to comply' with its obligations. The court, in deciding the matter, disapproved of the principles set out in Commercial Union Life Assurance Co v Label Ink [2001] L&TR 29 and said that the issue of 'material compliance' had to be determined on an objective basis and had to be assessed by reference to the landlord's ability to re-let or sell the premises without delay or additional expenditure. Applying that test, the court found in favour of the tenant.

Legal & General Assurance Society v Expeditors International (UK) [2006] 18 EG 151 (CS) concerned three warehouse units occupied by a tenant under a lease that contained a break clause entitling the tenant to terminate on giving six months' prior written notice and delivering up the premises to the landlord with vacant possession. The tenant served the requisite notice and then entered into negotiations with the landlord regarding its dilapidations liability under the lease. Terms were agreed and, in consideration of the payment by the tenant of a substantial sum, the landlord released the tenant from its obligations under the lease. Following the break date, the landlord claimed that the lease continued as the tenant had failed to deliver vacant possession because:

(1) a large quantity of unwanted property had been left at the premises;

(2) staff were still clearing the premises after the break date; and

(3) the tenant had failed to surrender the keys.

The court was of the view that the terms of the settlement were such that the landlord was no longer able to rely on the strict terms of the break clause. The court did say, however, if that had not been the case, it would have found that the tenant had failed to give vacant possession.