Seminar Notes 24.10.07 Christopher Bryden

2 Gray's Inn Square Chambers

Seminar Notes 24.10.07 - Christopher Bryden

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Seminar Notes

These notes were prepared by Christopher Bryden and form part of the seminar Termination of Tenancies for Tenant Default given on 24th October 2007 by the 2 Gray's Inn Square Chambers Property & Commercial Group.

Christopher Bryden

Index

Dilapidations: A Neglected Area?

Introduction

Dilapidations are a rather neglected area of law. When seeking new premises tenants tend to focus more on issues such as the level of rent and service charges. This can be a mistake. Dilapidations are breaches of a covenant to repair a building, contained within the lease. A failure to perform may give rise to substantial legal liabilities. The word “dilapidation” comes from the Latin for stone (lapis) and, taken literally, refers to the scattering of stones of a building. Of course dilapidations can take many forms including for example a leaking roof, and the term is used to describe the allowing of a building to fall into disrepair.

The purpose of this part of the seminar is to consider dilapidations generally followed by a detailed examination of two important recent cases which provide useful guidance as to the principles to be applied and the likely measure of damages.

Dilapidations generally

“Dilapidations” is in effect the word used to describe the cause of action that arises out of the breach of a repairing covenant contained in a lease. In the absence of such an express stipulation the obligations of a tenant towards his landlord at common law in respect of repairing are limited to the obligation to use the premises in a tenantlike manner and to the tortious doctrine of waste.

Tenant-like manner

This obligation is of uncertain scope and can be traced back at least two centuries (see Horesfall v Mather (1815) Holt NP 7) but includes the continuing obligation to repair acts which would amount to voluntary waste. It involves the obligation to take proper care of the premises, and to do, in the words of Denning LJ (as he then was) to “the little jobs about the place which a reasonable tenant would do”. Case-law has imposed obligations on tenants to keep the premises wind- and water-tight. The implied obligation will however be excluded where there is an express contract to repair – Standen v Christmas (1847) 10 QB 135.

Index

Waste

Waste is any act or omission which causes a lasting alteration to the nature of the land in question to the prejudice of the person who has the remainder or reversion of the land. It is a tortious obligation and therefore subsists independent of any contract or express or implied covenant. It is an ancient doctrine and was the subject of statute as early as the1267 Statute of Marlbridge.

Waste falls into two separate categories – it can be either permissive or voluntary. Permissive waste is damage through omission, for example simply allowing premises to fall into decay, or where a property was destroyed or damaged by fire other than an act of God. Accidental or negligent fires both constitute waste. It should be noted however that statute ameliorates the harshness of this rule and prevents a claim being brought against a person in whose property a fire accidently begins (the Fires Prevention (Metropolis) Act 1774 section 86, as amended). This modification is without prejudice to any contractual provision between landlord and tenant. Therefore where there is no contractual liability on the tenant to rebuild and the fire was accidental no claim can be raised against the tenant and there is no obligation to rebuild

Voluntary waste on the other hand is the doing of some act which tends to the destruction of the premises. This includes pulling down houses, removing fixtures which may not be removed, or changing the nature of land for example from pasture to arable land.

Liability for waste exists to ensure that the reversionary interest in property is not damaged by acts of tenants of that property. Therefore acts which technically would be waste will not be restrained by courts, nor will they found grounds for forfeiture under a re-entry provision for the commission of waste, if they improve the property. This is known as meliorating waste.

At common law initially no action for waste would lie against a tenant of any sort, due to the folly of the landlord not to restrain waste by express covenant – Countess of Shrewsbury’s Case (1600) 5 Co Rep 13b 2 Co Inst 300. The action instead was statutory. Tenants were first made liable for waste by the Statute of Marlborough (known as the Statute of Marlbridge) in 1267 (52 Hen 3), and the Statute of Gloucester 1278 (6 Edw 1) introduced the writ of waste, making the tenant liable to forfeiture and also treble damages. This latter Act was repealed only in 1879; the Real Property Limitation Act 1833 abolished the writ of waste as a remedy, but the rights and liabilities of the parties remained the same.

10.

Tenants for a period are however liable for voluntary waste, whether by themselves or by any other person (as they have a duty to prevent that person from so doing). Case-law has held that tenants for years are liable for permissive waste and therefore must do such repairs as are necessary to preserve the premises in as good a state as at the beginning of the tenancy. Tenants for life are not save where there is a condition to keep the premises in repair; and tenants from year to year may be liable but probably only in the same extent as the duty to use the premises in a tenantlike manner and therefore there is no obligation to do substantial repairs such as reroofing; nor to deal with wear and tear. It is likely that shorter tenancies fall outside the obligations - weekly tenants are not liable for permissive waste.

Index

11.

The landlord has recourse to either an injunction or to damages. Injunctions are likely only to be granted where there is proof that the waste will cause substantial injury to the reversion. Damages will be awarded on the basis of the injury to the reversioner, calculated by considering the depreciation of the selling value of the reversioner’s interest.

12.

Claims for waste are rare and the limitations of the doctrine means that recourse to it is rarely sought. It is far simpler to rely on an express covenant contained in a lease requiring the tenant to repair. The remainder of these notes focus on dilapidations and the consequences of a failure to comply with a covenant to repair.

What is repair?

13.

The first stage when considering a covenant to repair is to construe its true meaning. Given that many leases were drafted decades ago this can be a daunting task. A covenant to repair must be construed according to the words used, and the sole duty of the court is to give proper and full effect to each word used. However it is important to note that a caveat to this approach is that when construing the covenant regard should be had to the age and nature of the premises when the lease commenced (Lurcott v Wakely & Wheeler [1911] 1 KB 905)

14.

This said however, where a covenant to repair is expressed in general terms, so long as it plainly expresses the intention that the premises are to be repaired by the tenant, kept in repair and given up at the end of the term in repair, the exact form of words is of little import.

15.

Examples of general terms include phrases such as:

•

To repair the demised premises and to yield them up in good and substantial repair and condition

•

To keep and leave the demised premises in good and tenantable order and repair

•

As often as the occasion requires well and substantially to repair uphold and keep the premises, and the same so well and substantially repaired, upheld and kept to yield up at the end of the term

Index

16.

The obligation of the tenant is to keep and to deliver up the premises in a state of repair proper for such premises. It is important to note that this obligation may in fact require that the tenant must in fact put the premises into a better state than that in which he found them. This is not to say that there is generally a duty on the tenant to update the premises if they are old; they must be in a fit state of repair as old premises, and there is a presumption that at the time of taking on the lease the premises are in tenantable condition. But, if complying with the obligation to repair requires replacement of, in time, the entirety of the premises, part by part, this is what must be done. Unless a statute specifically provides otherwise, a failure to comply with a repairing covenant due to statute or regulations thereunder preventing compliance will still sound in damages. In such cases where the covenant predates the statute, frustration may be a defence.

17.

The inclusion of additional phrases such as “amend”, “renew” and “keep in good condition” may impose obligations that go beyond the obligation to repair. The latter has been held to refer to a separate concept and therefore imposes a heavier burden than a mere obligation to repair.

18.

There is a distinction between works which amount to repair and works which when properly viewed amount to improvements. The distinction is an important one as when considering whether a tenant is in breach of a covenant to repair by failing to carry out certain works it is essential to know what is covered by the obligation to repair. If works are properly categorised as improvements, a landlord will not be successful in bringing a claim against the tenant for the cost of the works. Repair has been considered to include restoration of premises from damage in respect of subsidiary parts, as opposed to reconstruction of the whole or substantially the whole of the premises. So replacing defective foundations or faulty drainage, laying joists etc would not be repair but something more. On the other hand, making good a defective roof or replacing floors, or external walls, which due to time have fallen into disrepair, would be included.

19.

Other examples include (As cited in Halsbury’s Laws of England, 4th Ed. 2006 reissue at 439 and 440):

Repair:

•

Rebuilding the front wall of a house and the foundations to comply with byelaws

•

Reinforcing a section of a steel frame

•

Replacing a defective wooden door with an aluminium door

•

Refixing cladding

•

Replacing the whole of a roof with vinyl corrugated sheets

•

Rewiring an entire farmhouse

•

Installing double-glazing (instead of old single-glazed windows)

Improvements:

•

Building damp-proof basement walls

•

Installing a damp proof course

•

Constructing new foundations

•

Underpinning

•

Rebuilding the house on better foundations

•

Rebuilding the wall of an extension

•

Rebuilding the front and rear walls

•

Reinforcing substantially the whole of the steel frame of an office building

•

Recladding a 12 storey block of flats

•

Replacing air conditioning by relocation of the equipment

Index

20.

As a general guide the questions to be considered when deciding whether doing something is repair or improvement are

Do the alternations go to the whole, or substantially the whole of the structure, or only to a subsidiary part?

ii)

Is the effect of the alterations to produce a building of a wholly different character to that which was let?

iii)

What was the cost of the works in relation to the previous value of the building, and what was the effect on the value and lifespan of the building?

21.

These questions should be considered bearing in mind, amongst other things, the nature of the building including its age; the condition when the tenant went into the premises; the terms of the lease; the value and lifespan of the building; the nature and extent of the defect. Unsurprisingly the test is of wide ambit and falls to be applied in individual cases to determine whether work is repair or improvement.

22.

Generally speaking however the standard of tenantable repair will vary in accordance with the circumstances of the building, and is such repair as having regard to the age, character and locality would make it reasonably fit for the occupation of a reasonably minded tenant who would be likely to take it at the time of the demise. Useful guidance as to the principles to be applied was given in the case of Riverside Property Investments v Blackhawk Automotive [2004] EWHC 3052; [2005] 01 EG 94, which merits detailed consideration.

Index

Riverside Property Investments v Blackhawk Automotive

23.

The landlord brought a claim against its former tenants for alleged breach of covenants to repair. The lease was granted in 1989 and was surrendered by Blackhawk in 2002. Riverside contended that the premises were in disrepair and served a lengthy list of disrepair items. Following mediation the only issue before the court (HHJ Peter Coulson QC) was in respect of the replacement of the roof and for fees and costs incurred in connection with the works on the roof.

24.

Upon the surrender of the lease, Riverside contended that the roof was delivered up in dilapidated condition. Immediately prior to the surrender of the lease, Blackhawk had carried out extensive repair work to the roof and therefore contended that it was in proper repair. The roof was made up of corrugated asbestos cement sheets. There were around 660 sheets which were attached to steel purlins by 2500 bolts.

25.

The 10-year lease granted to Blackhawk contained repairing obligations as follows:

“From time to time and at all times during the said term (whether the Lessor shall or shall not have served notice requiring the Lessee so to do) well and substantially to repair, uphold, cleanse, support, maintain, amend and keep and when necessary rebuild, reconstruct, renew or replace the demised premises and every part thereof...”

“To yield up the demised premises with the said Lessor’ fixtures and fittings and additions thereto at the determination of the term hereby created in good and substantial repair and condition in accordance with the covenants hereinbefore contained”.

26.

There was a further clause dealing with the liability of the tenant to pay costs and expenses including solicitors costs and surveyors fees incurred in or incidental to the preparation and service of any notice or schedule relating to the preparation and service of any notice or schedule relating to dilapidations, before or after the end of the term.

Index

27.

The work carried out by Blackhawk prior to the surrender of the lease involved replacing 122 of the asbestos cement sheets, roof lights, and all of the bolts. It followed various discussions between representatives of the Lessor and Lessee including the obtaining of a number of reports as to what could be done to the roof. Preliminary Schedules of Dilapidations were sent purporting to require a new roof. The chronology leading up to the instruction by Blackhawk of roofers to carry out the overhaul works shows a breakdown in the relationship between the two parties, with the representative of Riverside making clear that he “emphatically did not accept” the course of work undertaken by Blackhawk. As the learned Judge put it, “The essential tension between the ideal solution for this roof, on the one hand, and the existence of less costly remedial options, on the other, which can be discerned throughout the documents and events noted above, remained apparent to the end”.

28.

Following the surrender of the lease, Riverside immediately stripped off the roof and replaced it with a new roof. The cost of this roof was claimed as damages for breach of the repairing covenant.

29.

The learned Judge found that on the facts there was no doubt that the roof could be put into the covenanted condition by the carrying out of works that did not involve the complete replacement of the existing roof. The issue was therefore whether in fact the roof was put into such a condition by the works commissioned by Blackhawk.

30.

The learned Judge found that the roof was in the covenanted condition at the time of the expiration of the lease. He set out at paragraph 54 of his judgement the principles of law which he had to take into account:

•

A covenant “well and substantially” to repair does not require the tenant to put the property into perfect repair or pristine condition

•

The standard of repair is “that of an intending occupier of an industrial warehouse building, with modern construction, who judges repair reasonably by reference to his intended use of the premises”

•

This objective test must take into account the reasonably minded incoming tenant taking a lease of the premises on the same terms as the actual lease including, here, a full repairing covenant

•

If there is a dispute between replacement on the one hand and repair on the other, replacement will only be required if repair is not reasonably or sensibly possible

•

If there are two ways in which the covenant might properly be performed, the tenant may choose which method to utilise, and cannot be criticised for choosing the least expensive option.

31.

The Judge in applying these principles came to the conclusion that the roof was not handed over to Riverside in breach of the covenants to repair. He conducted a detailed examination of the methods used to repair the roof and the results of the repair work. It seemed to him that at the time of the handover the roof was capable of being repaired rather than wholly replaced and the works commissioned by Blackhawk was sufficient to render the roof in substantial repair. Whilst there were some deficiencies in the work carried out these were miniscule in number and de minimis; and would have been rectified under the Defects Liability Period free of charge. Therefore the claim by Riverside failed.

Index

32.

The Riverside case provides a useful guide to the principles to be applied when determining or advising on the standard of tenantable repair necessary to fulfil a covenant to keep in good repair and condition.

33.

There may be an exception from a covenant to keep in good repair and condition, for fair wear and tear. This depends on the construction of the covenant and the onus is on the tenant to show that evidence that the premises are not in good repair and condition can be explained by fair wear and tear. However a tenant will remain bound to do such repairs as may be required to prevent the consequences of fair wear and tear from producing disrepair that would not be produced by fair wear and tear.

Effect of Breach

34.

While a lease is subsisting a landlord has three primary remedies for a breach of the repairing covenant by a tenant: forfeiture, damages, or entry to carry out the repairs, recovering the costs from the tenant. However the Leasehold Property (Repairs) Act 1938 (as amended) requires the landlord to serve a notice under section 146 (known, perhaps unsurprisingly, as a section 146 notice or alternatively as a notice of dilapidations) before forfeiting a lease for disrepair or claiming damages. A tenant is entitled to serve a counter-notice, and if he does, the landlord must obtain the permission of the court before proceeding.

35.

The Leasehold Property (Repairs) Act 1938 applies in circumstances where the following conditions are fulfilled:

The tenancy was for a term of years certain of not less than 7 years

Three years or more remain unexpired at the date of service of the section 146 notice

The tenancy is not a farm business tenancy and the Agricultural Holdings Act 1986 does not apply.

There is an express repairing covenant

36.

The Act does not apply to covenants imposing an obligation to put premises into repair at the time of taking possession of the premises or within a reasonable time thereafter.

Index

37.

Within 28 days from the date of service of a section 146 notice the lessee may serve on the lessor a counter-notice claiming the benefit of the Act.

38.

A right to damages for the breach of a repairing covenant cannot be enforced, where there are three years or more of the term of the lease remaining, unless a notice is served. A notice is not valid unless it clearly states that the lessee is entitled to serve a counter-notice.

39.

Where a counter-notice is served the lessor may not take any proceedings to enforce any right of re-entry or forfeiture for breach of the covenant other than with the leave of the court. Leave will not be given until the lessor can prove:

That immediate remedying of the breach is necessary to prevent a substantial diminution of the value of the reversion, or that this has already occurred due to the breach;

Immediate remedying is necessary to give effect to any statute, byelaw or court order;

Where another party occupies part of the premises to which the covenant applies, immediate remedying of the breach is needed in the interests of that other occupier;

The breach can be immediately remedied at an expense which is small relative to the cost that would be caused by a postponement; or

Special circumstances render it just an equitable for leave to be given.

40.

The giving of leave is discretionary. Proof must be demonstrated on the balance of probabilities, as must a breach of the covenant, as at the date of the application for leave. The court can impose conditions on either party whether it grants leave or refuses it.

Index

Damages

41.

A claim for damages for breach of the covenant to repair is covered by both common law and by statute. The general common law rule for breach of a covenant to leave the property in repair is the cost of returning the property into its proper state of repair, giving credit for betterment, with a sum for consequential loss (loss of rent, professional fees, but not the cost of drawing up a schedule of dilapidations). Following the expiration of the lease (“terminal dilapidations”) damages are the only remedy available to the landlord.

Damages = Cost of Repair - Betterment + Consequential Loss

42.

The method which would have been chosen by the tenant to put right the disrepair will normally be the measure upon which the cost of repair will be based , and where the court is not convinced that the work will in fact be carried out by the landlord costs such as VAT will not be recoverable as they will not in fact be incurred. However if the work will be done a landlord who is not registered for VAT can recover the VAT on the cost of the repairs. Loss of rent is only recoverable if repairs prevented reletting during the period of repairing.

43.

The damages will also be reduced by any amount received by the landlord during the subsistence of the tenancy for breaches of the repairing covenant; and, if he forfeits the lease, for obtaining possession of the premises at an earlier date than he would otherwise have done.

44.

The common law provisions are tempered by the operation of section 18 of the Landlord and Tenant Act 1927. This provides:

18.

Provisions as to covenants to repair.—

(1)

Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.

Index

45.

A limit on the amount of damages is therefore imposed by this section. There is a cap on the amount of damages which can be recovered by the landlord of the amount by which the value of the reversion has been reduced by the failure to comply with the obligation to repair.

46.

So, where for example it is established that premises would have been demolished at or shortly after the termination of the tenancy no damages may be recovered, as compliance with the covenant to repair would have made no difference to the value of the reversion. The burden of proof lies on the tenant, who will have to show a definite intention on the part of the landlord to escape liability.

47.

Section 18 requires that a valuation exercise is carried out so as to ascertain the level of the cap. This should be from the date of determination of the lease containing the covenants to repair, though subsequent events which relate to the valuation can be taken into account. The ascertainment of the diminution in value must be carried out even where no buyer could be found for the premises, and in such cases it does not follow that the damage to the reversion is zero.

48.

Where the repair work has been carried out, or is intended to be carried out by the landlord, the costs of so doing are in the first instance evidence of the diminution in value so long as it is reasonable that the work done or intended to be done should be carried out by the landlord. Where the work has not been done and there is no intention to do them, the cost may have little bearing on the diminution in value

49.

The effect of section 18 is therefore to confine damages for breach of the repairing covenant to actual losses suffered by the landlord to the value of the premises. If a building that has fallen into disrepair in breach of a tenant’s covenant to repair sits in a prime location and is likely to be sold to a developer who will pay full price notwithstanding the disrepair, no loss is incurred so no damages are recoverable from the tenant, despite the breach of the covenant.

Index

Latimer v Carney

50.

The recent decision of the Court of Appeal in the case of Latimer v Carney [2006] EWCA Civ 1417, [2006] All ER (D) 347 illustrates the effect of section 18.

51.

The landlords demised a property in Manchester to the Respondent for a period of six years from 25 December 1988 for use as a carpet shop. Included as covenants were the following:

“At all times to put keep and maintain the demised premises and the appurtenances thereof... and the painting and decoration thereof in good and tenantable repair and condition throughout the said term... in the third year of the said term and also in the last year thereof (however determined) to prepare and then to paint in a proper and workmanlike manner all the inside...parts heretofore or usually painted... and also in every third year of the said term and in the last year thereof... to prepare and then to paint in a proper and workmanlike manner all the external parts heretofore or usually painted”

52.

The lease was extended to terminate on 24 December 1997. The annual rent was £9,500. After the grant of the extension Mr. Carney assigned the lease to Ms. Edwards, the second Respondent, with the consent of the Latimers. Ms. Edwards gave up possession at the end of the term.

Just before the expiration of the term the Latimers obtained a report from a surveyor, Mr. Hughes, dealing with the disrepair to the premises and the cost of rectification. There was an addendum report produced by the same surveyor after the tenant vacated. The Latimers therefore carried out repairs to the roof in April 1988 and produced an invoice in the sum of £3,813.

Index

54.

The Latimers then remarketed the property, but were unsuccessful in finding a tenant due to poor marketing conditions. A tenant was eventually found, but would only take the premises on condition that the property was re-furbished, and planning consent and building use change was obtained, to convert the property into a fast-food outlet. The Latimers spent £24,000 over the course of a year in which no rent was paid, in order to tenant the property at a rent of only £1,000 more than previously.

55.

In 2002 the Latimers began proceedings against all of the former tenants of the property for breach of the covenants. They claimed the costs of remedial works in the schedule of dilapidations, being £12,840, or alternatively the cost of the remedial works as carried out, being £23,823.39; loss of rent for a year, and council tax during the time the work was carried out.

56.

The tenants defended the action and noted that there was required to be evidence to show that the cap imposed by section 18 was not exceeded. At trial the Latimers failed as they were unable to prove the actual cost of repair or he damage to the reversion, and failed to separate repair from improvement.

57.

The trial judge (HHJ Gilliland QC) found a breach of the repairing covenant, but loss was not proved and section 18 applied.

58.

The Court of Appeal (Wilson LJ and Arden LJ who gave the judgement of the court) affirmed that it was the landlord who had the burden of showing the amount of the damage to the reversion. The court could infer the damage from the evidence as to the estimated cost of repairs, and even without expert evidence, the inference that the cap had not been exceeded couldbe drawn from the fact that the landlords had to repair the roof of the premises before they could be relet, and had to make other repairs. The correct inference was that the damage to the reversion could be known from the estimated cost of repairing the roof and the other breaches upheld by the trial judge, subject to an uncertainty discount of 60%.

59.

Arden LJ also found that the general rule that the measure of damages is the reasonable cost of executing the repairs required to fulfil the covenant is not only subject to the statutory cap but also general principles of law, including the Ruxley v Forsyth [1996] AC 344 principle that where the expenditure required to be done to an asset to remedy a breach of contract is out of all proportion to the benefit to be obtained, the appropriate measure of damages is the diminution of value of the asset rather than the expenditure to put it right (in the case of Ruxley a swimming pool which was of slightly smaller dimensions than specified).

Index

60.

Arden LJ left open the question of whether where unlike the owner in Ruxley there was no clear intention on the part of the landlord to expend the money required to remedy the defect, a claim could be successfully resisted, and this question will stand to be determined in a suitable case. However in Latimer the monies had been expended and a landlord’s conduct in taking or not taking steps to remedy a breach of the covenant to repair may throw light on the question of whether the repairs are reasonably necessary and thus whether there is any diminution in the value of the reversion.

61.

Arden LJ noted that there was no expert valuation evidence, which was “unfortunate”. She held that the court needs to know the difference between the value of the property repaired and unrepaired, and a single joint expert would be best placed to establish this. This is consistent with the CPR. The valuation exercises required by section 18 are to be performed at the determination of the lease, though subsequent event can be taken into account.

62.

In obvious cases a court can presume that disrepair damages the reversion, and use repair bills as a guide to quantum. Arden LJ declined to list what factors, in the absence of expert valuations, would assist the court in assessing diminution. She held that the landlords were obliged to do the repairs due to the dilapidations, but what they did was to go further than simply repairing, and they did improvements at the same time. Some of this work may have rendered some of the work required to remedy the breach of covenant futile and unnecessary. Therefore the right course was to infer diminution from the estimated costs of any repairs required to be done by the outgoing tenant, which the landlord could demonstrate that he had then done. For other repairs a discount, formulated on the court’s best judgement on the material available to it, should be applied.

63.

The difficulty with the Latimer decision is that it does not provide any formulaic method of calculating the likely damages. Broad-brush principles are of assistance, but only go so far. At present then the quantum of damages in dilapidations cases can be no more than an educated guess. It should therefore be standard practice to present the court with expert evidence addressing the effect of section 18 and the cap it imposes.

Index

Betterment

64.

Credit will generally be given for betterment unless the betterment is simply a by-product of the performance of the covenant to repair. Betterment is, put simply, the improvement of a property. Reference to case law for examples of betterment is the appropriate recourse when considering whether credit should be given.

Practical steps

65.

Dilapidations require a number of considerations when bringing, or defending a claim. Amongst others are:

•

Examine the lease and determine the nature and extent of the covenants

•

Consider the distinction between repair and improvement

•

Ensure that the remedy sought is appropriate. After the ending of the lease damages is the only available remedy

•

Consider the effect of section 146 notices and counter-notices

•

Carefully draft the schedule of dilapidations

•

Consider the quantum of damages and the effect of section 18

•

Prepare the ground to prove or disprove the damage to the reversion

•

Involve a surveyor for expert reports.

Index

Conclusion

66.

Covenants to repair are an important aspect of any lease and can result in substantial costs to the tenant, or to forfeiture or claims in damages. New tenants should be advised of the potential risks and obligations arising out of such covenants; landlords should be aware of the distinction between repairs and improvements, and of the effect of the section 18 cap.

Christopher Bryden