by Delyth Williams
With the exception of the area of rent review, perhaps no field of landlord and tenant law poses more practical and legal problems for the busy practitioner than that of repairs and dilapidations. While the principles upon which legal liability for disrepair are based seldom change, the application of those principles to particular situations produces a variety of interesting and practical problems. This article considers the developments in this area of landlord and tenant law in the last 12 months or so.
The “demised premises”
In attempting to determine the scope of the repairing liability it is always necessary to ascertain the physical extent of the repairing covenant. In Straudley Investments Ltd v Barpress Ltd [7] 1 EGLR 69; (1987) 282 EG 1224 the appellants’ lease was for a term of 99 years from 1936 and the parcels clause demised “all that piece or parcel of ground with the messuages and buildings erected thereon” comprising 67 to 81 Mortimer Street, London. The lease was on full repairing and insuring terms and required the tenant to “repair support and uphold the said messuages buildings and premises” and to keep the premises in repair “with all additions erections and improvements”. In 1975 the defendants (the respondents in the Court of Appeal) had put up a fire escape across a part of the roof of the plaintiffs’ property and the plaintiffs sought a mandatory injunction under Ord 14 requiring the defendants to remove the fire escape and ventilation vent erected by them on and against the roof of the plaintiffs’ property.
At first instance, Mervyn Davies J, although accepting that there was a very strong case for a summary judgment, considered that the defendants should be given leave to defend. He reached this conclusion on the basis of dicta in Cockburn v Smith [4] 2 KB 119 and Douglas-Scott v Scorgie [1984] 1 WLR 716; (1984) 269 EG 1164. The Court of Appeal held that it was of the opinion that the cases of Cockburn v Smith and Douglas-Scott v Scorgie were distinguishable because the terms of the present lease were crystal clear.
Whether the roof space on the top floor of a building divided into six flats was included in the demise of the top-floor flat was the main issue before the Court of Appeal in Hatfield v Moss [8] 2 EGLR 58; [1988] 40 EG 112. The parcels clause of the lease did not expressly mention the roof space and the accompanying plan showed a space described as the “roof space” outside the line of the demise. The defendant had converted the roof space to provide a playroom and storage accommodation. The Court of Appeal held that the rule was that a plan which is for identification only cannot control the parcels clause but where the parcels clause is not explicit the plan may be looked at to solve problems. In the instant case the parcels clause was explicit, so that it was not appropriate to look at the plan.
Repair or renewal?
In many disputes concerning the liability for disrepair the main question is frequently whether the disrepair falls within the meaning of “repair” or amounts to “renewal”. In Stent v Monmouth District Council [7] 1 EGLR 59; (1987) 282 EG 705 the dispute concerned the front door of a dwelling-house which stood on an exposed site facing the prevailing south-west wind. The tenant complained of the constant ingress of water blown through or under the door which, over a period of 30 years, had been a source of trouble, inconvenience and damage to carpets. A variety of remedial works had been carried out by the local authority landlords, including replacement of parts of the door which had rotted and, in 1979, the replacement of the whole door. The trouble was finally cured in 1983 by the installation of a purpose-built aluminium self-sealing door unit. The tenant claimed damages for the damage to the carpets etc. The Court of Appeal held that the fact that the door did not fulfil its function of keeping out the rain was not, ipso facto, a defect for the purpose of the repairing covenant but, in this case, the door had itself become damaged, had rotted and become out of repair to the extent that it twice required replacement. The damage suffered by the tenant was within the ambit of the repairing covenant.
In Rich Investments Ltd v Camgate Litho Ltd [8] EGCS 132 the defendant company was the assignee-tenant of a 28-year lease of premises built in 1920. In the lease the tenant covenanted (for himself and his assigns) to “repair and keep the exterior and interior of the demised premises … in good and substantial repair”. The lease also provided that the lessors were entitled, following notice, to make good any default of the lessees under the covenant to repair and recover the expenditure. When a brick wall enclosing a fire escape suffered subsidence damage, the lessors carried out underpinning works. The subsidence damage was caused by the inability of the subsoil to carry the weights placed on it. Mr R N Titheridge QC (sitting as a deputy judge of the High Court) held that the work carried out by the lessors was a repair within the meaning of the covenant, so that they were entitled to recover their expenditure. Further, it was no longer tenable to argue that a tenant was not liable to carry out works because they amounted to inherent defects. The correct test was to ascertain if the necessary work was too extensive to amount to a repair and whether the work was in the nature of a repair; Sotheby v Grundy [1947] 2 All ER 761. One should then look at the actual work in relation to the age, character and locality of the building and consider whether it was a repair.
The question of whether piecemeal repairs had become impracticable so that the time had come for complete replacement of the roof in question was considered by the Court of Appeal in Murray v Birmingham City Council [7] 2 EGLR 53; (1987) 283 EG 962, where a terraced house, built in 1908, was somewhat run down and let on a weekly tenancy. The premises had a long history of disrepair affecting the roof which the landlords had, sooner or later, attended to. In the county court, the tenant alleged that the roof was seriously defective, but the assistant recorder found as a fact that, at the material time, the roof was capable of being repaired by periodical attention and had not yet reached the stage where the only practical action was the replacement of the whole roof. On appeal, the tenant contended that continued piecemeal repair was a hopeless proposition. The Court of Appeal held that the evidence did not support the submission the piecemeal repairs of the roof had become impracticable so that the time had come for complete replacement.
The question of the scope of the repairing obligation can also have significant weight in other areas of landlord and tenant law such as at rent review. In Norwich Union Life Insurance Society v British Railways Board [7] 2 EGLR 137; (1987) 283 EG 846 the repairing covenant in a lease for 150 years with provisions for rent review at 21-yearly intervals required the tenant “to keep the demised premises in good and substantial repair and condition and when necessary to rebuild, reconstruct or replace the same”. The arbitrator considered that this covenant placed on the tenant a more onerous obligation than the usual covenant to keep the demised premises in good and substantial repair and he accordingly made a downward adjustment of 27.5% to reflect the difference. Hoffmann J was of the opinion that it was a matter of impression of the repairing covenant, but the language indicated that the draftsman had two separate obligations in mind: first, that of repair and, second, that of rebuilding, reconstructing or replacing the entire premises. The learned judge was of the same impression as the arbitrator and the appeal was dismissed.
Implied repairing obligations
Apart from the Murray and Stent decisions, the question of the scope of the implied repairing obligations under sections 11-16 of the Landlord and Tenant Act 1985 (formerly sections 32-33 of the Housing Act 1961) has been considered in several recent cases. Section 11 of the 1985 Act provides that, where the section applies, there is an implied covenant by the landlord:
(a) to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes),
(b) to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and
(c) to keep in repair and proper working order the installations in the dwelling-house for space heating and heating water.
It is to be noted that section 11 of the 1985 Act has been amended by section 116 of the Housing Act 1988 in respect of leases granted on or after January 15 1989. Under the new section 11 (1A) the implied repairing obligation extends to “any part of the building in which the lessor has an estate or interest” if the “disrepair … is such as to affect the lessee’s enjoyment of the dwelling-house or of any common parts, as defined in section 60 (1) of the Landlord and Tenant Act 1987, which the lessee, as such, is entitled to use”. In addition, the landlord’s implied covenant in relation to the installations has been similarly amended to cover “an installation which, directly or indirectly, serves the dwelling-house and which either (i) forms part of any part of a building in which the lessor has an estate or interest; or (ii) is owned by the lessor or under his control”. For a fuller discussion of these changes see “Legal Notes” [9] 01 EG 78.
In Morris v Liverpool City Council [8] 1 EGLR 47; [1988] 14 EG 59, it was common ground that the tenancy agreement incorporated the covenants implied by the former section 32 and the facts of the case gave rise to a dispute over the implied repairing covenant. The facts were that, when the tenant was away from home, there was a fire in the block in which the flat was situated and the fire brigade broke down the door of the flat. As an emergency measure, the local authority boarded up the door. However, about a week later the tenant discovered that the boarding had been removed and his flat burgled and he claimed that there was a contractual obligation on the local authority to repair the door and door frame within a reasonable time after receiving notice of the damage done by the fire brigade. The Court of Appeal held that there was a contractual obligation on the local authority but there was no evidence that the delay in replacing the door was unreasonable. However, the Court of Appeal expressed the view, obiter, that if the tenant had established the breach the loss caused by the burglary would not have been too remote.
The implied repairing obligations did not apply in Barrett v Lounova (1982) Ltd [8] 2 EGLR 54; [1988] 36 EG 184, where the tenancy agreement in question contained a covenant requiring the tenant to keep the inside of the house in repair but there was no provision as to exterior repair although a right of access was reserved to the landlord. The tenancy had commenced in 1941 and the tenant in question was a statutory tenant by transmission, so that the implied repairing obligations under the 1985 Act did not apply. The tenant complained that the disrepair of the structure and exterior had caused extensive water penetration and damage to internal plaster and timbers. The assistant recorder found the landlords liable, implying a covenant by them to repair the outside either on the “officious bystander” or “business efficacy” test. In addition, the assistant recorder considered that the landlords were in breach of the Defective Premises Act 1972. The Court of Appeal held that the implied obligation of the landlord was correlative to the tenant’s express covenant based upon the principle of “correlative obligation” enunciated by Slade LJ in Liverpool City Council v Irwin [1977] AC 239. The Court of Appeal was of the opinion that, sooner or later, the tenant’s covenant (which was enforceable throughout the tenancy) could not be complied with unless the outside was kept in repair and the obligation to keep the outside in repair must fall on the landlords. In the circumstances, it was unnecessary to determine any potential liability under the Defective Premises Act 1972.
The question of the application of the Landlord and Tenant Act 1985 was one of the many issues raised in the complex case of Palmer v Sandwell Metropolitan Borough [7] 2 EGLR 79; (1987) 284 EG 1487. The respondent had been a weekly council tenant since 1974, but from 1978 the house had been the subject of serious condensation problems, so that by the time of the trial a substantial part of the house had become barely habitable. While the council had taken some steps of a remedial nature the problem continued. In 1983 the council issued a new tenant’s handbook and charter which contained a draft tenancy agreement requiring the council to put right any defects of design and assumed that this obligation had become part of the tenant’s own tenancy agreement. The Court of Appeal was of the opinion that the tenant’s secure tenancy could be varied only by agreement between the landlord and tenant or by a valid notice pursuant to section 103 of the Housing Act 1985. The tenant was therefore entitled only to £200 damages awarded in respect of the minor disrepair attracting section 11 of the Landlord and Tenant Act 1985.
The obligations under sections 11-14 of the 1985 Act do not arise until the landlord has had notice of disrepair. In O’Brien v Robinson [3] AC 912 the House of Lords held that, under the implied covenant, the landlord’s obligation to start carrying out any work of repair to the premises did not arise until he had information about the existence of a defect in the premises such as would put a reasonable man on inquiry whether works of repair were needed. The matter was considered recently in Dinefwr Borough Council v Jones [1987] 2 EGLR 58; (1987) 284 EG 58, where the main issue was whether notice of the want of repair had been given to the local authority landlords. The facts were that an official of the environmental health department of the local authority inspected the premises (not in relation to repairs but to ascertain the condition as to cleanliness). He did, however, observe defects of repair, as did the district valuer (who was inspecting the house in the process of the tenant’s right to buy application). The Court of Appeal held that the environmental health officer was a responsible official of the local authority, that items of disrepair were brought to his notice and the fact that the knowledge was acquired for a different purpose did not prevent it from fixing the local authority with notice of disrepair for the purposes of the 1985 Act. Further, the information given by the district valuer to the local authority also constituted sufficient notice.
The question of notice was also raised in Hall & Mountain v Howard [8] 2 EGLR 75; [1988] 44 EG 83, where in 1983, where the appellant, who was thinking of buying the reversion to his lease, commissioned a surveyor to report on its value. The surveyor provided his valuation and his report made reference to a number of defects in the building. These included, inter alia, the absence of a damp-proof course, need for rerendering, condition of airbricks, loose slates, need for new flashings, and rotten woodwork and windows. The surveyor estimated the cost of repairs at £2,295. The report was sent to the respondents’ agents in January 1983, but the negotiations came to nothing. No repairs were carried out at the time. In January 1985, a notice was served on the respondents’ agents by the local housing authority under what was then section 9 of the Housing Act 1957. The notice required certain repairs to be done at an estimated cost of £2,500. These were completed within the six months stipulated by the notice. In October 1986, the respondents issued the summons for possession, arrears of rent and mesne profits. The appellant counterclaimed for damages for breach of the covenant to repair the structure as implied by section 11 of the Landlord and Tenant Act 1985. The appellant had had to move out of the dwelling while the 1985 repairs were being done. The respondents’ defence to the counterclaim was that as they had received no notice of the alleged breach of the repairing covenant they were not liable. The Court of Appeal held that the report gave notice in terms which would have “gone home” to the reasonable landlord. It was immaterial that the surveyor’s report was concerned with the marketing of the property and did not deal with the urgency of the work or the consequences to the occupier, as the landlords could have inspected but chose not to do so.
Damages for disrepair
Several interesting factors were discussed in McClean v Liverpool City Council [7] 2 EGLR 56; (1987) 283 EG 1395, where the tenant listed a large number of defects in her statement of claim against the local authority under the 1985 Act. These defects were taken from her surveyor’s report (which was an agreed document), and at the trial before the county court judge the local authority called no evidence. The county court judge dismissed the claim for special damage, as he did not accept the tenant’s evidence. As to general damage, he referred to section 11(3), which states:
In determining the standard of repair required by the lessor’s repairing covenant, regard shall be had to the age, character and prospective life of the dwelling-house and the locality in which it is situated.
He concluded that, on the evidence, the dwelling-house did not fall below the standard implied. The Court of Appeal held that, on the issue of special damage, there were no grounds for interfering with the county court judge’s finding. On the issue of general damage, it was not a matter turning solely on the reliability of the tenant’s evidence, as there was, for example, the surveyor’s report, which had not been challenged. The condition of the property was bad, with water penetrating upstairs, the roof covered with felt as a temporary repair, gaps between window sashes and wall, rising damp penetrating perished brickwork, an old injected damp-proof course no longer functioning, and other defects.
Several interesting questions were raised in McDougall v Easington District Council, The Guardian February 9 1988, where the tenants were removed out of their council house so that the local authority could carry out works to improve the weather proofing characteristics of the premises. The works included the removal of timber elevations and their replacement by brickwork, fitting new windows and doors and so forth. The cost of the works was around £10,000 and they increased the value of the house from about £10,000 to £18,000. When the tenants re-entered the house they found that it required redecorating and claimed that the cost of the redecorating following the “repairs” should be met by the council-landlord. The council refused to pay more than the £50 which had been promised before the tenants moved out. The Court of Appeal was of the opinion that whatever test was applied the works were not “repairs” within the implied repairing obligation as they went beyond that term into the field of “improvements”. In these circumstances the landlord was not required to reimburse the tenant for expenses incurred in consequential redecoration except for the amount which was agreed before the work was carried out.
In Sturolson & Co v Mauroux [8] 1 EGLR 66; [1988] 24 EG 102 the landlords claimed for possession and arrears of rent and the tenants counterclaimed for damages for breaches of the landlords’ covenants to repair and provide services. The case is of some importance as it concerns the question of the calculation of damages in the case where the tenancy is a Rent Act protected tenancy. The facts of the case were that the county court judge dismissed the landlords’ possession claim, assessed rent arrears due to the landlords and awarded the tenant £5,895 together with interest on his counterclaim. The landlords appealed on the amount of the counterclaim and challenged the matter under two heads. First, it was contended that the fair rent registered in respect of the subject property by the rent officer under section 70 of the Rent Act 1977 took account of the state of disrepair owing to the landlords’ breaches. Second, it was alleged that the tenants had failed to mitigate their loss. The Court of Appeal rejected this challenge and held that the rent officer had taken account of the disrepair but he had also to place a value on the landlords’ repairing covenant, as it could not be assumed that the covenant would not be carried out in the future; thereafter, the failure to carry out that covenant “sounds in damages”. Finally, in view of the age of the tenant and the age and state of health of his wife, the county court judge was justified in holding that they had done all they could to mitigate their loss.
An example of the calculation of damages for breach of the implied obligation to repair can be seen in Fraser v Hopewood Properties [6] 1 CL 217, where the tenant of a flat brought a claim against his landlord under section 32 of the Housing Act 1961. The flat was immediately beneath the roof and, from 1980, it leaked. Damp penetrated the window frames, damaging decorations, furnishings and carpets. The defect was remedied 3 1/2 years after it started. Judge Parker held that an award of £2,250 would be made for the cost of redecoration, £200 for damage to a carpet and other soft furnishings and £2,000 general damages.
In Chiodi v De Marney [8] 2 EGLR 64; [1988] 40 EG 80 the question before the Court of Appeal was whether in determining the damages payable by the landlord to the tenant for breach of the implied covenants under the Landlord and Tenant Act 1985 the amount included for “inconvenience and distress” was too high. The county court judge had found the tenant’s flat to be in a state of great disrepair, largely owing to the accumulated effects of unremedied dampness. The judge awarded £5,460 for the loss in value of the premises and for inconvenience and distress on the basis of £30 per week for 3 1/2 years; £4,657 for special damage in respect of furniture, clothing etc, and £1,500 for injury to health. The landlord appealed only in respect of the £5,460, on the basis that the calculation based on £30 per week was too high and failed to take into account that the registered rent was only £8 per week. The Court of Appeal held that, although the award was at the very top of what could be regarded as proper, the sum was not so large as to indicate an error.
Finally under this head, in Mather v Barclays Bank plc [7] 2 EGLR 254 the lease in question was for a period of 13 years expiring on June 24 1982 and the tenants had requested a new tenancy under section 26 of the Landlord and Tenant Act 1954 and duly made an application to the court. The difficulties which arose were partly due to initial doubts as to whether the tenants would, on facing a substantial claim for dilapidations, give up possession of the premises or would continue as tenants at a much increased rent. The tenants gave up possession of the premises on June 1 1984 and the landlords found new tenants. The new tenants covenanted to carry out repairs and substantial improvements in consideration of a reduction in rent during the first four years of the new lease. The improvements cost more than twice what the repairs by themselves would have cost and there was no practicable way by which the premises could have been first repaired without any improvement. The investment value of the landlords’ reversion following the letting to the new tenant (a building society), capitalising the cash flow and taking a 7% yield, produced a valuation well above that for the property repaired but unimproved. Judge Paul Baker QC (sitting as a High Court judge) held that the landlords’ claim failed under the first limb of section 18(1) of the Landlord and Tenant Act 1927, as the value of the reversion had not been diminished by the breach of covenant.
Other remedies for disrepair
Prior to the coming into force of the Landlord and Tenant Act 1987 the court had power under section 37 of the Supreme Court Act 1981 to appoint a receiver. In Evans v Clayhope Properties Ltd [8] 1 EGLR 33; [1988] 03 EG 95 a receiver and manager was appointed by the court to collect rents and manage a block of flats in poor repair. The question before the court in this case was whether the court had power in an interlocutory application (before the rights of the parties had been determined at trial) to order the landlords to meet a deficit in the moneys coming into the receiver’s hands for the payment of his expenditure or remuneration, as the income received by him from the rents paid by long leaseholders and protected tenants was wholly inadequate to meet the expenses of management. The Court of Appeal held that a receiver and manager appointed by the court is not the agent of the parties nor a trustee for them and they have no control over his expenditure.
The question of the appointment of a receiver for a block of flats was also at issue in Blawdziewicz v Diadon Establishment [8] 2 EGLR 52; [1988] 35 EG 83. The tenants in this case were mainly long leaseholders and the freehold owners had failed to carry out the repairs required. The leases contained covenants by the landlords to repair the structure and common parts and further provided for the payment of a service charge by the tenants. The previous freeholders had obtained planning permission for the erection of some penthouse flats on the top of the block and work of construction had begun shortly after the court hearing. The repairs under the landlords’ covenants had not yet begun, but the specifications for such work had been obtained and the appropriate notices given under section 20 of the Landlord and Tenant Act 1985. Hoffman J held that the balance of convenience lay in the appointment of a receiver, which would safeguard the interests of tenants without causing any particular difficulties for the landlords.
The Landlord and Tenant Act 1987 Part II deals with the appointment of managers by the court to assume responsibility for the management of the premises containing the flats where the landlord is in breach of any obligation owed by him to the tenant under his tenancy and relating to the management of the premises in question or any part of them (or, in the case of an obligation dependent on notice, would be in breach of any such obligation but for the fact that it has not been reasonably practicable for the tenant to give him the appropriate notice). In addition, for the court to make an order appointing a manager it must be satisfied that the circumstances by virtue of which the landlord is (or would be) in breach of any such obligation are likely to continue and it would be just and convenient for the order to be made. Part II brings together the law on the appointment of managers of property by the court and simplifies the power of the court under section 37 of the Supreme Court Act 1981 to “appoint a receiver (where) it appears to the court to be just and convenient to do so” and the case law which had developed (see the decisions in Hart v Emelkirk Ltd [3] 1 WLR 1289; (1982) 267 EG 946 and Daiches v Bluelake Investments Ltd [1985] 2 EGLR 67; (1985) 275 EG 462, where a receiver was appointed, and Parker v Camden London Borough Council, Newman v Camden London Borough Council [1985] 1 All ER 141, where the Court of Appeal refused the tenant’s applications for the appointment of a receiver).
Under section 21 a tenant of a flat contained in any premises to which Part II applies can apply to the court for an order appointing a manager to act in relation to those premises. Part II applies to premises consisting of the whole or part of a building if the building or part contains two or more flats (section 21(2)), but it does not apply to a tenant holding a tenancy under the Landlord and Tenant Act 1954 Part II. Section 22 requires a preliminary notice to be served by the tenant on the landlord before an application for an order can be made and, where the matters complained of are capable of being remedied by the landlord, it must require the landlord (within such reasonable period as is specified in the notice) to take such steps for the purpose of remedying them as are specified. The court may, however, dispense with the requirements to serve such a notice.
The conditions for the making of the application for the appointment of a manager are outlined in section 23, namely, in a case where a notice has been served under section 22, the period specified for compliance has expired without the landlord having taken the steps he was required to take under the notice (or it may be that the requirement for compliance was not applicable in the circumstances of the case). There are also provisions applicable where the requirement to serve a notice has been dispensed with by an order of the court.
The court may appoint a manager to carry out such functions in connection with the management of the premises or such functions of a receiver or both as it thinks fit. The court can make an order where it is satisfied that the landlord either is in breach of any obligation owed by him to the tenant under his tenancy and relating to the management of the premises in question or (if notice is required) would be in breach but for the fact that it had not been reasonably practicable for the tenant to give him the appropriate notice or where it is satisfied that other circumstances exist which make it just and convenient for the order to be made (section 24 (2)(a), (b)).
Part II also makes provision for the court to order remuneration to be paid to the manager by the landlord or the tenants of the premises or both. The order appointing a manager is registrable under the Land Charges Act 1972 and the Land Registration Act 1925.
The importance of the provision for the appointment of a manager by the court is highlighted by the fact that one of the conditions for the making of an acquisition order under Part III of the Act is that the appointment of a manager under Part II would not be an adequate remedy in the circumstances or that, for a period of three years up to the date of the application, there was in force an appointment of a manager under Part II.
The question of the standard of proof for leave to proceed under section 1(3) of the Leasehold Property (Repairs) Act 1938 was one of the main issues in Associated British Ports v C H Bailey plc [8] EGCS 134. In this case the plaintiffs were the owners of a reversion on a 99-year lease in which the tenant had covenanted to repair and maintain the premises. When the premises fell into a state of extreme disrepair the plaintiffs served a schedule of dilapidations requiring repairs to the sum of around £600,000 and the diminution in the value of the reversion was placed at some £3,000. The tenant served on the plaintiffs a counternotice claiming the protection of the Leasehold Property (Repairs) Act 1938. When the plaintiffs were granted leave to issue re-entry proceedings the tenants appealed. Harman J held that the plaintiffs were entitled to proceed with the forfeiture of the lease as at least one of the grounds in section 1(5) of the 1938 Act was satisfied, namely ground (a). Further, the rule emanating from Land Securities plc v Receiver for Metropolitan Police District (1983) 267 EG 675 was that the standard of proof on the plaintiff to obtain leave to proceed is not so high as in a substantive action for forfeiture.
The various remedies available to the tenant and how the principle of mitigation of damage should be applied in the context of dilapidations were considered by the Court of Appeal in Minchburn Ltd v Peck [8] 1 EGLR 53; [1988] 15 EG 97. In this case the plaintiffs were claiming arrears of rent and mortgage payments and the defendant was counterclaiming for breach of the landlords’ express repairing covenant. On the counterclaim the landlords were ordered to carry out specificed works and pay damages and they appealed against the counterclaim judgment. The tenant relied on two grounds of disrepair, namely (a) that he had suffered dampness as a result of the disrepair of a leaking roof and (b) as a result of subsidence and settlement, internal decorations had been consequentially damaged. The county court recorder, in reaching his conclusion on (a) above, rejected the landlords’ contention that the tenant should have mitigated his loss by informing them of the leaking roof. In the Court of Appeal, Slade LJ disagreed with this conclusion and held that to require a tenant to mitigate his loss by informing the landlord of a disrepair:
does not turn the landlord’s responsibility into a responsibility to repair on notice. He remains liable to do the repairs whether or not he has been given notice. It is only a question not of liability but of how far some sorts of damage can be claimed and, in particular, damage for discomfort and inconvenience when the person claiming to have suffered the discomfort and inconvenience could have improved his position by giving notice to the landlord.
Disrepair and heads of claim
The question of whether VAT can be claimed on a claim for dilapidations was considered in the case of Drummond v S & U Stores Ltd [1] EGD 369; (1981) 258 EG 1293. In this case the plaintiff was the freeholder owner of shop premises let to the defendant tenants. The lease contained covenants by the tenants to repair and decorate the premises, the general repair covenant stipulating:
from time to time and at all times during the said term well and substantially to repair, cleanse and put and keep in good and substantial repair and condition, the premises.
A further stipulation required the tenants to pay to the landlord all costs, charges and expenses (including solicitors’, counsel’s and surveyors’ costs, charges and fees) incurred by the lessor in, or in contemplation of, any proceedings in respect of the lease under sections 146 and 147 of the Law of Property Act 1925. The landlord alleged, inter alia, that the tenants had failed to put and keep the premises in good and substantial repair and had not painted or decorated them in accordance with the covenants and claimed, inter alia, damages for the diminution of the value of the reversion.
Glidewell J held that the proper measure of damages was the diminution in the value of the reversion but in the absence of direct evidence the cost of the repairs may be a useful guide. Further, the amount of damages was to include value added tax where the landlord was not registered for such tax. A landlord’s arrangements with a new tenant were res inter alios acta as regards the old tenant against whom damages were being claimed.
In the more recent case of Elite Investments Ltd v T I Bainbridge Silencers Ltd (No 2) [7] 2 EGLR 50; (1987) 283 EG 747 the question before Judge Paul Baker QC (sitting as a High Court judge) was whether a sum of £84,364 awarded in a previous action as damages against the tenants should bear VAT at the rate of 15%. The plaintiffs (who were in the position of landlords) were not registered for VAT and if they carried out the repairs they would have to pay the tax and not recover it from HM Customs and Excise. In such a case the damages would not be sufficient without VAT and Drummond v S & U Stores Ltd (supra) was cited as authority for that contention. However, the Drummond case indicated that it was necessary to consider all the options including (a) the landlords’ leaving the premises unrepaired and eventually selling them for redevelopment, or (b) letting the premises unrepaired or (c) letting to a tenant who would undertake the repairs and reclaim the VAT. In (a), (b) and (c) the landlord would not have to bear the burden of the VAT. Another option would be for the landlord to undertake the work and bear the VAT with a view to selling the property in full repair. On the facts the learned judge held that the evidence was that the plaintiffs would not spend the necessary money on repairs in order to sell off, so that VAT should not be added to the damages.
Delyth W Williams BA LLB MCD MRTPI ACIArb is principal lecturer in Urban Estate Management in the School of the Built Environment at Liverpool Polytechnic and co-author of Assured Tenancies just published by The Estates Gazette Ltd.
