Business lease — Repairing covenant — Construction — Liability of tenant for terminal dilapidations — Whether required works going beyond repairs — Whether preventive works required — Standard of repair — Claim allowed in part
The claimant acquired the freehold of a petrol filling station, garage and shop premises, which he already occupied under a licence from the defendant oil company. The defendant had a lease of the premises dating from 1964. This contained a repairing covenant under which the defendant undertook that it would “to the satisfaction of the Lessor’s Surveyor well and substantially uphold support maintain amend repair decorate and keep in good condition the demised premises with the appurtenances and all additions which may at any time during the said term be made thereto…”. There was an obligation to deliver up the premises so maintained at the end of the lease.
The defendant gave notice terminating the lease with effect from September 2000, and the claimant brought a claim for terminal dilapidations. Issues arose as to: (i) whether the defendant’s obligation as tenant extended beyond matters of repair properly so called, so as to require certain major items of plant to be replaced; (ii) the extent to which works required to comply with the covenant could include a preventive element; (iii) the required standard of repair; and (iv) the extent to which the obligation was affected by the requirement for the works to be “to the satisfaction of the Lessor’s Surveyor”.
Held: The claim was allowed in part.
1. The wording of the covenant presupposed that the item in question suffered from some defect, namely some physical damage or deterioration, or, in the case of plant, some malfunctioning, such that repair, amendment or renewal was reasonably necessary. The clause extended to the doing of works that went beyond repair strictly so called: Fluor Daniel Properties Ltd v Shortlands Investments Ltd [2001] 2 EGLR 103 and Credit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76 applied.
2. However, there was no authority for the proposition that purely anticipatory, preventive work, where no damage or deterioration in the condition of the subject matter had yet occurred (or had yet occurred to an extent sufficient to constitute a breach of the covenant), could be called for or the reasonable cost of it recovered. The fact that a piece of equipment was old, and would inevitably have to be replaced in time, did not mean that preventive works could be required to prevent the consequences of the equipment failing where, in the meantime, it continued to perform its function: Sheldon v West Bromwich Corporation (1973) 25 P&CR 360 distinguished.
3. The standard of repair was that which would, at the start of the term, have made the premises reasonably fit for the class of reasonably minded tenant likely to take the premises at that date, having regard to the age, character and locality of the premises: Proudfoot v Hart (1890) 25 QBD 42 applied. In the instant case, it was to be assumed that the class of tenant was a person or organisation such as the defendant. The question was, therefore, what a reasonably minded oil company would reasonably have required, at the time the lease was granted, to render the premises reasonably fit for use as a place from which to run the business of a petrol filling station and attached shop, together with car sales and facilities for motor repairs.
4. The reference in the covenant to works being “to the satisfaction of the Lessor’s Surveyor” entitled the claimant’s surveyor to prescribe what works should be done; it was not limited to determining the manner in which the work was to be performed. The surveyor did not have carte blanche over what to require: the works had to be to make good a want of repair or absence of good condition. In stipulating what was to be done, the surveyor had to exercise his own judgment and come to an honest view of what was required. Provided he came to a decision that a reasonable surveyor could reach, it would not matter that the defendant’s surveyor favoured another, cheaper, but no less reasonable, option. There was no requirement that the surveyor’s judgment should be communicated to the defendant before the expiry date of the lease. There was a continuing obligation on the part of the defendant both to repair to the satisfaction of the claimant’s surveyor and to deliver up the premises so repaired.
Hazel Williamson QC (instructed by Paul Davidson Taylor) appeared for the claimant; Nicholas Dowding QC (instructed by Morgan Cole) appeared for the defendant.
Sally Dobson, barrister
