Many landlords may find themselves in the unenviable position at the end of a lease where a tenant has left the property in state of disrepair. The landlord will consequently be obliged to repair the property to both reinstate its marketable value and ensure it is usable for the next tenant. This situation raises two key questions:
- What costs can be recovered by the Landlord from the Tenant if the Landlord is forced to make substantial repairs?
- Does the landlord need to wait to make the claim before carrying out repairs?
A recent case which sheds some light on the above is Peachside Ltd v Koon Yau Lee and another [2024] EWHC 921 (TCC). In this case the Landlord was entitled to recover the sum of £542,671.17 in respect of the repairs they had carried out.
In this case the Landlord co-owned a former textile warehouse in the Chinatown area of Manchester, over which they had granted a 14-year tenancy to a tenant who was using the premises to run a restaurant.
Crucially the Lease document contained a variety of standard express repair covenants which obliged the Tenant to keep the property in repair. Whether or not a lease document contains these repair covenants will be a decisive factor in deciding whether the Landlord will be able tot recoup the costs of repairs. Unfortunately, the tenants took no steps to comply with their repairing covenants before vacating the premises. In fact, the condition of the premises was described as "a warzone with grease" by the Landlord.
As a result, the Landlord brought proceedings against the tenant claiming damages to recover the cost of renovation works. The Landlord sought to enforce the defendants' repairing obligations and served a section 146 notice and a schedule of dilapidations, in order to particularise their claim.
With regards to question 1 & 2 above, the Judge presiding over the case, his honour Judge Stephen Davies, laid down some useful guidelines:
- The tenant has to perform their repairing obligations covenants in the manner that is least onerous to them. In general, such performance will be the starting point for any assessment of damages.
- The practical effect of the above is that the tenant was obliged to return the premises in good condition and with systems in satisfactory working order, but they were not required to install new equipment with any particular remaining life expectancy. The standard to which the building was to be repaired was the standard at the time of the beginning of the tenancy.
- Nevertheless, any claim by the landlord for the cost of repairs was subject to the rule that they could not recover for a loss which they could have reasonably avoided or was disproportionate to the benefit obtained.
- Furthermore, the fact that the landlord had carried out more extensive work than was caused by the tenant's lack of repair did not itself prevent them from recovering the cost of such reasonable works to remedy the tenants lack of repair.
- With regards to question 2 above, the fact that the landlord had already carried out the work did not prevent them from claiming reasonable damages and in fact the costs of the works already carried out was used to infer the infer the amount of reasonable damages due to the landlord.
In summary landlords should bear in mind that they can enforce tenant's repair covenants and that landlords can carry out remedial works on dilapidations which occur during a tenancy before serving a S146 notice. This approach should allow Landlords to protect the tenantable value of their properties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.