Landlord and tenant – Breach of covenant – Damages – Appellant holding long lease of flat – Claim for breach of respondent landlord’s insurance and reinstatement obligations in respect of flood damage and for disrepair to common parts – Judge dismissing claim for most of relevant period on ground that appellant not in occupation of flat for reasons unconnected to the damage and disrepair – Whether appellant entitled to damages – Whether damages in principle compensating for impairment of amenity value of appellant’s proprietary interest in the flat or for discomfort, inconvenience and distress actually suffered – Appeal allowed
The appellant held a long lease of a flat in a mansion block in London NW1. The lease contained covenants by the respondent landlord to maintain and repair the common parts of the building, to insure the building and to lay out any moneys received from the insurer with all convenient speed in rebuilding, repairing or otherwise reinstating the building. The appellant was obliged to pay a service charge in respect of the respondent’s costs of performing those obligations.
Between 2005 and 2008, the appellant did not live in the flat but instead lived elsewhere with his sister. In April 2005, there was a serious leak in the flat above, which caused serious damage both to the appellant’s flat, which he had been in the course of refurbishing, and to the flats below all the way down to the basement. Contractors engaged by the respondent’s agent undertook repair works later in 2005 but the works were seriously inadequate. The respondent received a payment in respect of their insurance claim in April 2006. A second leak from the flat above, less serious but of a persistent nature, occurred in 2006.
In 2007, the appellant engaged his own contractors to make good the continuing defects in the decorative state of his flat. His expenditure in doing so was ultimately dealt with as part of a settlement of proceedings against him by the respondent for arrears of services charge.
Meanwhile, the common parts of the building were also in a dilapidated and dingy condition, a state of affairs which continued from 2005 through to early 2008, when the appellant moved back into the flat, and thereafter until the respondent sold its reversion in 2011 and thereupon ceased to be responsible for maintenance.
The appellant brought a claim against the respondent in the county court for damages for: (i) breach of the insurance and reinstatement obligations in the lease, limited to the period after the respondent received the insurance moneys in 2006; and (ii) breach of the obligation to maintain and repair the common parts.
The judge found as facts that the deficiencies in the contractor’s works in 2005 were essentially decorative and did not render the appellant’s flat uninhabitable, and that the disrepair to the common parts was not severe. She dismissed the claim in respect of insurance and reinstatement on the ground that the appellant had not been living in the flat during the relevant period between the 2005 flood and the completion of the 2007 repair works and had therefore suffered no inconvenience or loss of amenity as a result of the breach. The claim for breach of the repairing covenant was dismissed for the same reason in respect of the period from 2005 to early 2008. The judge did however award £1,500 for the disrepair to the common parts to the period from January 2008 to March 2011, after the appellant’s return to the flat.
The appellant appealed. The central issue on the appeal was whether, as a matter of principle, the damages in such a case were to compensate for the impairment of the amenity value of the lessee’s proprietary interest in the flat or for discomfort, inconvenience and distress which the lessee actually suffered because of the disrepair.
Held: The appeal was allowed.
(1) The issue in the instant case would not arise in most cases since the lessee would either remain in the flat, so that his personal loss of amenity and inconvenience was equivalent in value to the impaired amenity of the flat, or he would vacate the flat because of the disrepair, so that his non-use of the flat could properly be said to have been caused by the breach. However, as a matter of principle, damages in a case of the kind in question were awarded for loss caused by impairment of the lessee’s property right, rather than for personal inconvenience, discomfort and distress. It was therefore irrelevant, as a matter of principle, what the lessee did with his property while it was impaired and whether it was occupied or not during that period.
Distress and inconvenience caused by disrepair were not free-standing heads of claim, but were only symptoms of interference with the lessee’s enjoyment of his asset, whether it was a long lease or a periodic, secure or even statutory tenancy. In each case, the lessee or tenant enjoyed a recognisable species of property right, in return for payment, either in the form of a premium, a rack rent or a fair rent. The breach of the lessor’s obligations caused an impairment, even if only temporary, in the value of the property rights for which the lessee had paid. If, in any of those cases, the amenity or value of that bundle of rights to the lessee or tenant was impaired by the lessor’s or landlord’s breach of covenant, then discomfort, inconvenience or distress might be suffered as symptoms of that loss. However, the relevant loss was the impaired amenity of the property for which the tenant has paid, rather than just discomfort, inconvenience and distress: Earle v Charalambous [2006] EWCA Civ 1090; [2007] HLR 8; [2006] PLSCS 207, Shine v English Churches Housing Group [2004] EWCA Civ 343; [2004] HLR 4 and McCoy & Co v Clark (1982) 13 HLR 87 applied; Hewitt v Rowlands (1924) 93 LJKB 1080, Wallace v Manchester City Council (1998) 30 HLR 1111; [1998] 3 EGLR 38 and Calabar Properties v Stitcher [1984] 1 WLR 287; [1983] 2 EGLR 46 considered.
(2) In a case such as the present, the lessee paid a premium for the assignable right to the enjoyment of occupation of a specific property, for a period usually longer than his own lifetime, and the quality of that right was underpinned by the lessor’s repairing and reinstatement obligations. The quality of enjoyment depended on the lessor’s promise to carry out those obligations diligently and in due time, rather than to neglect or delay in their performance, and it was therefore irrelevant that the lessor incurred no cost in their performance where the cost was met either from insurance or service charge. Accordingly, it was not fatal, to a claim for damages for the impairment in the lessee’s rights, that the lessee might have chosen not to make full use, or even any use, of those rights during part, or even all, of the relevant period, for reasons unconnected with the disrepair itself.
(3) The use, or non-use, of the lessee’s property rights during the period of disrepair was not irrelevant for all purposes. It might be relevant in cases where, for example, a lessee was able to mitigate his loss by living with a family member rent-free, as opposed to a case where he had to rent alternative premises and where the rental cost might be the best measure of the lessee’s loss. It might be that non-use for reasons unconnected with the disrepair should be regarded as a form of mitigation of loss, even if there was no intention to mitigate, although it would not wholly cancel out the loss constituted by the impairment of amenity for which the lessee had paid, even if he lived elsewhere rent-free. In any event, mitigation was not the only principle by reference to which the limited use or non-use of leasehold premises during the period of disrepair might be relevant. Moreover, the court was entitled and indeed obliged to temper the rigour of the rules implementing the compensatory principle, which lay at the heart of the law of damages, in cases where the particular circumstances made it just to do so. That might admit quantification of damages in excess of the current rental value: Calabar and County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916; [1986] 2 EGLR 246 considered.
(4) Applying those principles to the instant case, the appellant’s non-occupation of his flat during most of the period of disrepair was not fatal to his claim for his compensation for loss of amenity. He suffered precisely the same loss as would have been suffered by a lessee who, in comparable circumstances, had remained in the flat throughout, namely a serious although temporary impairment of the rights in relation to that flat conferred on him by the lease, for which he had paid a full premium. As a starting point, that impairment should be valued by reference to the rental value of the flat during the relevant period, with a very substantial percentage discount to reflect the judge’s finding that the disrepair in the flat was cosmetic and did not render it uninhabitable, and that the disrepair in the common parts was not, by reference to other cases with which she was familiar, of a particularly severe kind. The damages should then be further substantially reduced by reference to the fact that, unusually, the appellant chose not to occupy the flat for most of the relevant period, so that the effect upon him of the impairment of his rights was very much less than it would have been on a lessee who, as was usual in such cases, remained in occupation throughout. The judge’s nil award in relation to those elements of the appellant’s claim should therefore be set aside.
Damages should instead be awarded by reference to an estimated notional rental value for the flat. The appropriate award for the period from 2005 to March 2006 was 2.5% of the notional rental value, which was half of what the court would had awarded had the appellant been in occupation. For the period from April 2006 until the completion of the repairs to the flat in the first quarter of 2007, when the amenity value of the appellant’s interest was impaired both by the state of the common parts and by the disrepair of the flat itself, the loss of amenity was 20% of the notional rental value; again, that figure should be reduced by half to 10% by reason of the appellant’s non-occupation. A 2.5% apportionment should again be awarded for the period from the second quarter of 2007 until the appellant resumed occupation of the flat in early 2008. Overall, the appropriate award for those three periods was £7,380.
Simon Williams (instructed by direct access) appeared for the appellant; Ellodie Gibbons (instructed by Charles Russell Speechly LLP) appeared for the respondent.
Sally Dobson, barrister
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