The Court of Appeal has upheld a judge’s ruling assessing the damages for dilapidations for a 1970s Soho office building at more than £1.3m, but less than the statutory cap.
Sunlife Europe Properties, landlord of the combined office and retail premises at 3-5 Soho Street, 6/7 Soho Street and 12 Soho Square, had claimed £2.172m in dilapidations, while former tenant Tiger Aspect Holdings had argued that the cost of remedial works was around £700,000, but capped by diminution in value at £420,000.
In March, Edwards Stuart J assessed the common law measure of damages, after the tenancies came to an end in November 2008, at £1,353,254, found that the value of the reversion in its actual condition was £4.462m and that its value in the condition in which it ought to have been was £5.87m. As a result, the statutory cap under s18 of the Landlord and Tenant Act 1927 – which limits recovery to the diminution in value caused by the tenant’s breaches – did not apply.
Upholding that decision, and dismissing Tiger Aspect’s appeal, Lewison LJ praised the judge for a “meticulous” judgment. He said: “In assessing the common law measure of damages the judge was required to find the sum that would have put the premises into the condition in which the tenant ought to have left them. The judge fully appreciated the nature of this task.”
Adding that the judge had carried out his task with “conspicuous care”, he gave examples of the way in which the judge focused on what works were necessary to put the building into the condition in which the tenant ought to have left it.
He found that the tenant was required to have replaced a lead mansard roof and to have replaced boilers, but that the landlord had carried out works which went beyond what the tenant was required to do on basement toilets, leading him to reduce the claim by 50% for that item. He also found that, even if the tenant had left the facade in good repair, the landlord would have re-rendered it to make the building more attractive, so disallowed the bulk of the landlord’s claim for that item.
Rejecting Tiger Aspect’s claim that the works differed from what it, as tenant, could have been compelled to do, and so the burden shifted to the landlord to prove that the statutory cap should apply, he said that the judge found that, with some exceptions, the work that the landlord had actually carried out was either work that the tenant ought to have carried out in order to comply with its covenants, or was cheaper work that the landlord had carried out by way of mitigation of its loss.
On that basis, he found that the judge was correct to conclude that, in calculating the statutory cap, the amount of the diminution in value could be “inferred from the costs of the repairs reasonably necessary to make good the loss caused by Tiger’s breaches of covenant, there being no satisfactory evidence that it is any lower amount”.
Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd & anr Court of Appeal (Longmore, Lewison and Floyd LJJ) 17 December 2013
Martin Hutchings QC (instructed by Forsters LLP) for the Claimant/Respondent
Mark Wonnacott QC (instructed by Mishcon de Reya) for the Defendants/Appellants
The Court of Appeal has upheld a judge’s ruling assessing the damages for dilapidations for a 1970s Soho office building at more than £1.3m, but less than the statutory cap. Sunlife Europe Properties, landlord of the combined office and retail premises at 3-5 Soho Street, 6/7 Soho Street and 12 Soho Square, had claimed £2.172m in dilapidations, while former tenant Tiger Aspect Holdings had argued that the cost of remedial works was around £700,000, but capped by diminution in value at £420,000. In March, Edwards Stuart J assessed the common law measure of damages, after the tenancies came to an end in November 2008, at £1,353,254, found that the value of the reversion in its actual condition was £4.462m and that its value in the condition in which it ought to have been was £5.87m. As a result, the statutory cap under s18 of the Landlord and Tenant Act 1927 – which limits recovery to the diminution in value caused by the tenant’s breaches – did not apply. Upholding that decision, and dismissing Tiger Aspect’s appeal, Lewison LJ praised the judge for a “meticulous” judgment. He said: “In assessing the common law measure of damages the judge was required to find the sum that would have put the premises into the condition in which the tenant ought to have left them. The judge fully appreciated the nature of this task.” Adding that the judge had carried out his task with “conspicuous care”, he gave examples of the way in which the judge focused on what works were necessary to put the building into the condition in which the tenant ought to have left it. He found that the tenant was required to have replaced a lead mansard roof and to have replaced boilers, but that the landlord had carried out works which went beyond what the tenant was required to do on basement toilets, leading him to reduce the claim by 50% for that item. He also found that, even if the tenant had left the facade in good repair, the landlord would have re-rendered it to make the building more attractive, so disallowed the bulk of the landlord’s claim for that item. Rejecting Tiger Aspect’s claim that the works differed from what it, as tenant, could have been compelled to do, and so the burden shifted to the landlord to prove that the statutory cap should apply, he said that the judge found that, with some exceptions, the work that the landlord had actually carried out was either work that the tenant ought to have carried out in order to comply with its covenants, or was cheaper work that the landlord had carried out by way of mitigation of its loss. On that basis, he found that the judge was correct to conclude that, in calculating the statutory cap, the amount of the diminution in value could be “inferred from the costs of the repairs reasonably necessary to make good the loss caused by Tiger’s breaches of covenant, there being no satisfactory evidence that it is any lower amount”. Sunlife Europe Properties Ltd v Tiger Aspect Holdings Ltd & anr Court of Appeal (Longmore, Lewison and Floyd LJJ) 17 December 2013Martin Hutchings QC (instructed by Forsters LLP) for the Claimant/RespondentMark Wonnacott QC (instructed by Mishcon de Reya) for the Defendants/Appellants
