Maeve England, Partner at Mogers Drewett is often asked about repairs at the end of a lease and in particular dilapidations – works of repair which the tenant should have carried out, but did not.
Where works have not been properly conducted, the landlord is entitled to be put in the position they would have been in, had the works had been carried out in accordance with the contract, and are entitled to the cost of repairs as well as loss of rent for the period during which repairs are conducted. There is a cap imposed by s18 of the Landlord and Tenant Act 1927 which means that damages cannot exceed the decrease in value of the property as a result of the tenant’s breach of obligations. This is known as the diminution in value.
The usual way of calculating diminution is by valuing the property at the end of the lease without the repairs, and comparing this to the value of the property in the condition it should have been in, had repairs been conducted. The difference is the diminution in value.
In the case of Sunlife v Tiger, the tenant (Tiger) left the premises in poor condition – a clear breach of obligations contained in the lease. The landlord (Sunlife) carried out extensive work in order to re let the property and issued proceedings against Tiger to recover costs. Whilst facts vary from case to case, the Judge’s approach is a useful starting point for all dilapidations cases and a useful checklist for commercial landlords and tenants.
The judge found that; had the tenant left the property in the proper state, the landlord would not have needed to conduct repairs. The Judge posed a number of questions:
- What was the scope of the tenant’s repairing obligations?
- What was the reasonable cost of returning the building to the condition it should have been in, had the tenant made repairs?
- What was the difference between the building value at the expiry of the lease and the condition that it should have been in, had repairs been carried out?’
The court outlined a number of other considerations. The standard of repair should be judged on the condition of the premises at the time the lease was entered into, not against the condition expected of equivalent premises at the expiry of the lease.
Whilst a tenant is not required to deliver premises with new or state-of-the-art equipment, they are required to replace equipment on a like-for-like or nearest equivalent basis.
If a landlord intends to redevelop the premises or carry out structural alterations which make repairs worthless, no damages are recoverable.
Whilst dilapidations claims are dependent on individual facts in each case and the terms of the particular lease, the case of Tiger is a useful reminder of the law and the approach of the courts, and serves as an aide memoire for tenants and landlords.
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