A recent case provided an opportunity for the High Court to confirm the correct approach to assessing damages where a landlord has undertaken some but not all the repair works required under a lease. In short, Car Giant leased units to the London Borough of Hammersmith and Fulham (“Hammersmith”) under full repairing leases which came to an end in 2011. Surveyors were instructed at the time and costed out a schedule to remedy the breaches of the leases at £400K.
By September 2016 Car Giant had carried out remedial works costing around £170k and, importantly for the case, had sub-let the units again.
Car Giant decided in 2017 to take Hammersmith to court to recover the full cost of the remedial works as per the 2011 schedule even though they had not been fully carried out and 6 years had elapsed since the lease expired.
Amongst the key points that Car Giant put forward to justify its position were that:
- finance was not available to carry out the repairs
- it did not want to disrupt its new tenants
- it did not want to incur the costs whilst Hammersmith was refusing to pay.
The court however was not satisfied that an adequate explanation had been provided for why all the works were not undertaken. Crucially, the fact that the units had been re-let at market rent did nothing to assist Car Giant with its case. The court concluded that the damages for the tenant’s repairs should be limited to £166,000. This would have been a particularly unsatisfactory outcome for Car Giant, given that some considerable time before the trial, Hammersmith had made a part 36 offer of £250,000. Car Giant would have received cost penalties for the failure to beat this offer at a trial and therefore any victory in this case was extremely hollow.
This was the second case covered by Michael Lewis, head of property disputes at Sherrards, and Ben Walters who were guest speakers at a recent CPD training day run by South of England Surveyors for over 100 surveyors based on the south coast.