Dilapidations – Letting of part of building – Appellant landlord bringing dilapidations claim after expiry of lease – Planning permission to develop airspace – Measure of damages – Whether cost of repair or diminution in value of reversion – Whether airspace included in demise – Effect of potential redevelopment upon value of claim – Appeal dismissed
The appellant owned a building in Streatham, London SW16, part of which comprised six flats that were let to the respondent housing association on a six-year lease. The demised property was described in the lease as “the rear section of the ground floor, the rear section of the first floor and the whole of the second and third floors”. Floor plans were attached showing the areas demised; the plans for the second and third floors showed a line running around the entire outline of the building.
After the expiry of the respondent’s lease, the appellant obtained vacant possession of the six flats. It received planning permission to redevelop the flats and the associated airspace by building up from the flat roof of the second floor to the level of the third-floor roof, and on the area of the second and third-floor balconies, to produce a total of 14 flats.
In proceedings against the respondent for dilapidations, the appellant sought to recover the cost of the remedial works. The respondent contended that the cost of the works would exceed the amount by which the value of the reversion had been reduced by the disrepair and that the damages should be capped at the latter amount, pursuant to section 18(1) of the Landlord and Tenant Act 1927. It contended that any potential purchaser would wish to develop the property in accordance with the planning permission that the appellant had obtained, and would therefore require no reduction in price in respect of the majority of the disrepair. The appellant submitted that section 18(1) was concerned only with the value of the reversion to the demised premises and that notional development of the airspace could not be taken into account since the airspace fell outside the respondent’s demise.
The judge found that the airspace was excluded from the demise but that it was appropriate to have regard to the prospects of developing it in order to assess the diminution in value of the reversion. He found that anyone purchasing the premises would do so with a view to redevelopment. Accordingly, he applied the cap and awarded damages of £61,349, which was less than half the sum claimed by the appellant. On appeal, the issues were: (i) whether the airspace was included in the demise; and (ii) the effect of the potential development on the damages to be awarded.
Held: The appeal was dismissed.
(1) On the correct construction of the lease, the relevant airspace was expressly included in the demise. Just as the plans did not operate only at floor level, but were intended to denote the volume occupied by the flat, so also they included the volume occupied by the balconies and the airspace from the second-floor roof up to the third-floor roof level. Had the parties intended to exclude it, the line on the plans could have been drawn so as to make that clear. The inevitable inference from the plans was that the entire volume of the building, bounded by the horizontal plane of the uppermost part of it, was intended to be included within the demise.
(2) The judge had correctly found that any purchaser of the premises would purchase with a view to redevelopment. Such a purchaser would not require or expect a reduction in respect of a large part of the repairs. It followed that the diminution in the value of the reversion brought about by the disrepair was less than the cost of repairs and was the appropriate measure of damages. The judge had properly assessed that value by reference to items of repair that a developer purchaser would have to carry out itself.
Peter Knox QC (instructed by Martin Shepherd & Co) appeared for the appellant; Martin Hutchings (instructed by Cook & Partners Solicitors) appeared for the respondent.
Sally Dobson, barrister