Can a loss of amenity claim be sustained even if the lessee is absent?
Disrepair claims are rarely encountered with long residential leases and while they are unlikely to raise any particular problems with liability, they may as regards causation and quantum.
First, the lessee might have chosen to rent out its property or leave it empty. In such cases, it could prove hard to establish any personal loss of amenity. Secondly, where the damage is to the common parts it is arguable that the loss of amenity is only indirect. Both of these circumstances were addressed by the Court of Appeal in Moorjani v Durban Estates Ltd [2015] EWCA Civ 1252; [2016] EGLR 13.
Durban Estates Ltd (“D”) was the freehold owner of a block of flats. Moorjani (“M”) was the long leaseholder. While M was staying with his sister, his flat suffered leaks from the flat above (there was no suggestion this was D’s fault). An action was brought on the basis that D had breached its insuring covenant and by reason of delay in arranging reinstatement. The proceedings included a separate claim for breach of the covenant to maintain the common parts of the building.
The judge found for M in relation to the common parts claim and awarded damages of £500 pa over three years. She also found that M’s absence from the flat had nothing to do with the state of the flat or the common parts and therefore refused to award damages for loss of amenity for the period M was absent.
M appealed, among other things: (a) the judge’s quantification of the common parts claim; and (b) her refusal to award damages for the period he was absent from the flat.
Common parts
The judge began by considering two cases, in which damages had been awarded for the state of common parts. Updated for inflation, these produced awards of £450-£513 pa. The judge decided to award M £500 pa, but cross-checked this by reference to a diminution in rental value. She calculated that assessing a 1-2% reduction in value was not dissimilar to the global figure of £1,500, which she had decided was the appropriate amount.
The Court of Appeal said this issue raised “no point of general principle” and endorsed the judge’s approach.
Voluntary absence from flat
By contrast, the Court of Appeal said the second issue did raise a point of principle. Briggs LJ considered a quartet of leading cases on damages for disrepair, but in particular the conclusion of Carnwath LJ in Earle v Charalambous [2007] HLR 8; [2006] PLSCS 186:
“A long-lease of a residential property is not only a home, but is also a valuable property asset. Distress and inconvenience caused by disrepair are not free-standing heads of claim, but are symptomatic of interference with the lessee’s enjoyment of that asset. If the lessor’s breach of covenant has the effect of depriving the lessee of that enjoyment, wholly or partially, for a significant period, a notional judgment of the resulting reduction in rental value is likely to be the most appropriate starting point for assessment of damages.”
Briggs LJ considered that this statement should not be limited to long leases, but applied to any tenancy where the lessee or tenant enjoys a recognisable species of property right, in return for payment, either in the form of a premium, a rack rent or a fair rent. His conclusions were helpfully set out in five principles, which can be summarised as follows:
(a) In any claim for disrepair and the like, it is not necessary to prove actual loss: any breach of covenant is an impairment of the rights of amenity afforded to the lessee by the lease and prima facie gives rise to a right to damages.
(b) It is therefore not a fatal obstacle to a claim for damages that the lessee chooses not to make full (or indeed any) use of the premises.
(c) However, residence elsewhere may be relevant to mitigation of loss.
(d) Even if relevant to mitigation of loss, residence elsewhere may well not cancel other forms of loss for “impairment of amenity”.
(e) In any event, in some circumstances, the court may quantify damages in excess of the current rental value.
Applying these principles, the Court of Appeal found that the judge had been wrong not to allow any general damages for the period when M lived elsewhere. The court went on to quantify damages based on a notional reduction in rent approach over various periods.
Wider implications
The judgment in relation to the second issue has obvious significance in an era when many long leasehold flats are not occupied by the lessee. In such cases, the main point in Moorjani is that a claim for loss of amenity can be sustained even though the lessee chooses not to live in the premises. The explanation of the basis of a claim for loss of amenity also has wider legal application, and Briggs LJ’s five principles were plainly intended for future guidance. Indeed, it is arguable that these principles may extend beyond the residential world and apply to commercial lettings as well.
However, in practical terms the first issue is likely to be of more use to practitioners. The Court of Appeal may well have said that its findings on damages for “shabby” common parts raised no point of principle, but its judgment certainly provides a template for damages in such claims by lessees.
This will be the case particularly where the lessee seeks to respond to a claim for arrears of service or administration charges. Indeed, the paucity of comparables is such that the trial judge’s “provisional” £500 pa figure for general damages could be a starting point for lessee claims for “shabby” common parts. And there is plainly scope to seek higher figures where common parts are in particularly poor condition or the rack rent is higher than in Moorjani.
Moreover, the significance is that the damages awarded to the lessee of an individual flat cannot usually be considered in isolation. A lessor of a block of 100 flats faced with a common parts claim of £500 per flat faces a potential bill of more than £50,000 a year in compensation.
Moorjani may therefore have opened the door for many more significant lessee claims of this kind.
Mark Loveday and Ellodie Gibbons are barristers at Tanfield Chambers
