Terminal dilapidation disputes are all too common, especially where a landlord is intending to relet premises at the earliest opportunity. In such circumstances, landlords may be in danger of confusing the work that is required to leave premises in repair with work that may be required to attract another tenant.
The decision in Carmel Southend Ltd v Strachan & Henshaw Ltd [2007] EWHC 1289 (TCC); [2007] PLSCS 118 illustrates this. The outgoing tenant accepted that the roof was in disrepair, but took the view that patch repairs were appropriate. The landlord disagreed, citing the incoming tenant’s refusal to accept responsibility for the roof in support of its claim for damages to cover the cost of a replacement.
The lease required the tenant to keep the property “in good and substantial repair and condition”, namely in such repair as, having regard to the age, character and locality of the property, would make it reasonably fit for the occupation of a reasonably minded tenant of the class that would be likely to take it: Proudfoot v Hart (1890) 25 QBD 42. How was this test to be applied in a case where an incoming tenant refused to sign a full repairing lease until the landlord had replaced the roof?
The judge accepted that it was entirely sensible, from a commercial perspective, for the landlord to replace the roof. He also accepted that he could take account of the actual stance of the incoming tenant, but ruled that the repairs that were required must be assessed objectively and did not depend upon the subjective requirements of the new tenant.
The patch repairs proposed by the outgoing tenant were reasonable and sensible, and would restore the premises to the condition required by the lease. Admittedly, the roofing contained asbestos, but this did not mean that the roof was in disrepair, and the fact that the tenant would have to replace some of the roof sheets did not make patch repairs impractical or mean that the tenant must replace them all.
What then of section 18 of the Landlord and Tenant Act 1927, which prohibits a landlord from recovering damages for terminal dilapidations if it can be shown that the premises are to be demolished or structurally altered in such a way as to render the repairs useless? Was the tenant entitled to deduct the cost of replacing the roof lights in the old roof from the damages due to the landlord, on the grounds that the replacement of the roof rendered this work unnecessary? The judge decided not. The landlord had undertaken more extensive, and expensive, repairs, but section 18 was designed to address structural alterations and demolition, and did not deprive landlords of a remedy merely because it had put the premises into better condition and had done more work than the outgoing tenant was required to do.
Allyson Colby is a property law consultant
