Landlord and tenant — Termination of lease — Tenant’s liability for repairs — Lease obliging tenant to keep premises in good and substantial repair — Industry guidelines on economic life of items — Whether lease requiring replacement of electrical or mechanical items — Claim dismissed
In 1979, commercial premises in Edinburgh were let by the claimant’s predecessors to the defendant for 25 years. The lease came to an end in 2004 and the defendant vacated the premises. A dispute arose concerning its liability for repairs under the repairing covenant in the lease, by which it was obliged to “at all times uphold, maintain, repair and renew [the premises]… so as to keep [them] in good and substantial repair and condition”.
The principal issue was whether the defendant was bound to pay for the replacement of certain electrical or mechanical items, including the lift, fire alarm, electrical wiring, boiler and convector heaters. The claimant had inspected the premises and served a schedule of dilapidations on the defendant, requiring it to replace the items in question.
The defendant failed to do so. The claimant maintained that it had had to carry out the work at a cost of £572,254 and that it had not been able to let the premises for six months, thereby incurring a consequential loss of rental income totalling £73,022. It sought to recover those sums from the defendant.
The claimant did not suggest that any of the items in question was defective or malfunctioning. However, said that they had to be replaced by the defendant according to guidelines relating to the economic life of such items published by the Chartered Institution of Building Services Engineers (CIBSE). Those guidelines were accepted generally as appropriate standards in the building services industry. It was unclear when the guidelines were published, but both parties accepted that they had not generally been recognised in 1979 when the lease was entered into.
The defendant submitted that its obligation under the lease was to uphold and maintain the premises in good and substantial repair and condition, which was to be judged by what the reasonable tenant or occupier would do.
Held: The claim was dismissed.
It was firmly established that the standard of repair required by a repairing covenant was to be determined by the parties’ expectations at the time the lease was granted. To rely upon a diminished expectation of economic life during in the course of the term ran counter to that general proposition. The practice of landlords and tenants in 2004 was therefore not the test of whether it was different from the practice that the parties to the lease had contemplated in 1979: Sandhu v Ladbroke Hotels Ltd [1995] 2 EGLR 92; [1995] 39 EG 152 followed.
The fact that an item was at the end of its economic life did not mean that the tenant was necessarily obliged under the repairing covenant to replace it. Equally, the fact that an item was of a given age, and that the CIBSE guidelines indicated that it was at, or approaching, the end of its economic life, did not, ipso facto, mean that it was other than in good and substantial repair and condition, particularly where the item was operational and the claimant was unaware of its reliability or servicing costs.
The fact that a prudent owner would undertake particular works, since the CIBSE guidelines were accepted generally as appropriate standards in the building service industry and that commercial tenants and landlords relied upon advice from that industry, could not bring the works within the scope of the covenant if its language did not admit them. The intention of the parties to the lease had to be determined from the language that they had used.
James McNeill QC and Philip Simpson (instructed by Wright, Johnston & Mackenzie, of Edinburgh) appeared for the claimant; Roy Martin, Dean of Faculty, and Eric Robertson (instructed by Dundas & Wilson CS, of Edinburgh) appeared for the defendant.
Eileen O’Grady, barrister
