REPAIRS, DILAPIDATIONS & UNINSURED RISKS
1. repairs
Common law on repairs
- Landlord must provide premises reasonably fit for their purpose.
- Landlord must keep premises wind and watertight, and must carry out repairs; this includes renewing any constituent part.
- Landlord is not required to make good damage caused by a third party, by an act of God or by an accident such as a fire.
- If premises destroyed, or damaged so as to be unfit for use or occupancy, lease end due to rule of rei interitus.
- If lease imposes obligation on the tenant “to repair”, this does not include an obligation to carry out "extraordinary repairs" (including replacement or renewal of something that has become worn out through the passing of time, and any latent and inherent defects in the design and/or the construction.
The meaning of “to repair”
For something to need repaired, it must have fallen into a state of disrepair.
“To repair” includes renewal or rebuilding of a constituent part (as opposed to the whole) of the premises - Proudfoot v Hart.
Lurcott v Wakely & Wheeler in 1911, held that an external structural wall is merely a subsidiary part of the premises that were leased, and its restoration would leave the remainder of the premises untouched and would not change the character or nature of the building.
Taylor Woodrow Property Co Ltd v Strathclyde Regional Council, 1996, held that “to the Landlord’s satisfaction” means “to the Landlord’s reasonable satisfaction”. Lowe v Quayle Munro 1997 SLT 1168 is a further example of application of this principle.
In Beatsons Building Supplies v Alex F Noble 2015, held that where a building is let out, the tenant was liable to repair a culvert that was under the premises.
Extraordinary repairs
An event that is unanticipated and outwith either party’s control is likely to be an extraordinary repair, as are decay through passage of time and latent and inherent defects.
Drafting points
If the premises are part of a larger entity the lease should contain a definition of “common parts”, and that the tenant is stated to accept the premises and the common parts as being in good condition and fit for their purpose.
Landlords should beware of circular repair clauses - “to maintain and repair, and for the purposes of maintenance and repair, to renew, replace and rebuild”, means that the tenant is only liable for renewing or rebuilding a constituent part of the premises, as opposed to the whole. A safer concession that is often given to the tenant is in the wording: “to repair and maintain, and if beyond economic or viable repair or maintenance, to reinstate, renew, replace and rebuild”.
In Thorn EMI Ltd v Taylor Woodrow Industrial Estates Ltd, Unreported October 29, 1982, held “to repair, rebuild, reinstate or replace the premises in the event of damage however the same shall arise”, is sufficient to impose on the tenant the obligation to make good latent and inherent defects.
There is a difference between having to keep the premises in “good repair” and having to keep them in “good condition”. In Quick v Taff--Ely Borough Council, [1986] Q.B. 809 it was held that a property can be in good repair but in bad condition; it could be damp and suffer from condensation and thus suffer from being inefficient and having less than ideal amenity. This would not be something requiring repair
Tenant’s revisals of repairs clause
The tenant should not be liable for damage by any insured risks. He should try and get a schedule of condition to identify wants of repair etc that the tenant does not require to make good at any time. He should try to not have to put the premises into any better condition (or to keep them in no worse condition) than that shown in the Schedule of Condition.
If a want of repair or defect is shown in the Schedule of Condition, is it “static” i.e. it is not going to get worse, or is it something that is likely to get worse? For example, dampness and rot have a tendency to spread. We should provide for what is to happen.
It is important that the landlord Insert a provision in the clause that the landlord is not required to make good any want of repair or defect that is shown in the schedule of condition, or else he will not have displaced the common law liability that a landlord has to repair and keep In good repair.
In multi--occupancy properties, the tenant can try to limit his expense by agreeing that his payment of service charge be fixed at a specific amount or capped (i.e. will not be more than a specified amount) for a period of time, and that increases in his liability will not be greater than a specific percentage.
Uninsured Risks
The concern is that the landlord does not insure for all the risks that he should. This can happen because the landlord simply does not bother, or he forgets, or does not realise that he has to get the insurance cover; insurance cover may simply not be available, or it ceases to be available.
Some tenants’ solicitors will try to expand the definition of “uninsured risk” to mean any risk that is not insured against. This effectively renders useless the whole repairing obligation, and will make the landlord’s interest unmarketable. A compromise for both parties is to define uninsured risks as “any risks expressly specified in the definition of the insured risks which
(i) are not insured because insurance is not available at all, or are not available in the UK insurance market (at economic rates); or (ii) are not insured or fully insured by reason of a policy exclusion, such that the full cost of reinstatement is not recoverable by the landlord under the insurance policy”.
The clause will usually deal with what happens if the property is damaged or destroyed by an “uninsured risk”. The landlord is unlikely to accept an absolute obligation to make good and to do without payment of rent in the meantime. The compromise often found is that the tenant has to notify the landlord of the damage or destruction, as the landlord is unlikely to know of the problem. This starts a clock ticking for the landlord to decide whether he is or is not going to make good at his own cost, and for rent abatement to apply. A period of, usually, anything from 1 month up to 12 months is allowed for the landlord to decide whether or not he wants to make good at his own cost. If he says that he will make good, then he must do so, and rent abatement continues until the property is made good again. If the landlord says he is not going to make good, or if he says nothing, then the clause will usually provide for the lease to end immediately, or alternatively, for the tenant to have the right to terminate it.
The clause will usually also provide for automatic termination of the lease if the premises are not able to be used or occupied within three years of occurrence of the uninsured risk damage.
In Lowe v Quayle Munro Ltd in 1997, held that as the lease imposed the obligation of renewal along with replacement and rebuilding, proof of necessity is needed if the landlord is to enforce this or if he is to be able to recover the cost.
2. Dilapidations
The landlord will usually instruct a building surveyor to inspect the premises and to prepare a schedule of dilapidations. The schedule should of course only relate to the premises that are exclusively leased to the tenant, and it should therefore not deal with common parts or any other parts of a multi--occupancy building or estate.
Case law on tenant’s liability
In Westbury Estates Ltd v The Royal Bank of Scotland Plc, 2006, held that the fact that something was at the end of its economic life did not mean that the tenant was required to replace it
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In West Castle Properties Ltd v Scottish Ministers 2004, held that the tenant was required to carry out any works that a prudent owner would have carried out to maintain the premises so they could be expected to last for their normal life; the tenant was entitled to take account of the increasing age of the premises.
In Pacitti v Manganiello, 1995, held that as the tenant had agreed in the lease that the premises had been in good tenantable condition at commencement of the lease, he could not now argue that it was for the landlord to prove this.
Specific implement
The court will only grant this if the obligation is in terms that are very clear and leave no doubt as to what is required of the defaulting party. Not available once the lease has ended Sinclair v Caithness Flagstone Co. 1898, and PIK Facilities Ltd v Shell UK Ltd, 2003.
In Coventry v British Gas Corp, 1984, unreported, the tenant was to do works at the expiry of the lease to restore the property to its original condition. Held this was an independent provision that could not arise before the end of the lease, and the lease allowed the tenant to operate on the premises until the day of expiry, but he then had an obligation to restore the premises. Specific implement was held to be competent in this case. This is quite different to an obligation to leave the premises in good repair and condition.
Measure of damages
This is the actual loss that is suffered by the landlord arising from the tenant’s breach of obligations in the lease. This may simply be the cost of carrying out the works necessary to achieve compliance with the obligations. However, there can be a significant increase or reduction in this amount, depending on the circumstances.
Prudential Assurance Company Ltd v James Grant and Co. (West) Ltd, 1982, held, that if the tenant could prove that the true loss suffered by the landlord was materially less than the cost of the works, it was open to the tenant to prove this.
Grove Investments Limited –v- Cape Building Products Limited 2014, the tenant “to remove from the premises at expiry and to repair any damage done by removal of fittings belonging to them, and to pay to the landlord the total value of the schedule of dilapidations prepared by the landlords...and that the landlords are free to expend all monies recovered as dilapidations as they think fit…”. Held the landlord is entitled to compensation for any loss suffered, but if there was to be no reinstatement by the landlord, amount of loss may be less than cost of the works.
@SIPP (Pension Trustees) Limited –v- Insight Travel Services Limited, 2015, held that as the lease contained a provision that the landlord was entitled to call on the tenant to pay an amount equal to the cost of putting the premises into good and substantial repair instead of requiring the tenant to carry out the work, the clear intention of the parties was that the landlord is entitled to payment of a sum equal to the cost of bringing the premises up to that standard. The Court held the clause was a payment clause - not a damages clause, and that the landlord was not restricted to having to accept only damages for breach of contract. Therefore there is a difference between normal dilapidations remedy of damages for breach of contract, where the landlord will be compensated for the actual loss suffered, and a provision where the landlord has a contractual right to an actual payment that can be quantified, such as in this case.
In PDPF GP Limited –v- Santander UK Plc in 2015, the landlord served a schedule of dilapidations on the tenant two weeks before expiry of the lease. The tenant refused to carry out the works, saying it had not received sufficient notice. Held that the tenant was required to do the works and was responsible, despite very short notice period.
Ken Gerber, Anderson Strathern
Tel:0141-242-6068