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Trimming the schedule Car Giant Ltd & Anr. v London Borough of Hammersmith & Fulham [2017] EWHC 197 (TCC)

The defendant council (LBHF) held a 25 year lease of a number of units in a fairly low-rent industrial estate close to Harlesden, west London. The lease contained a full repairing covenant.

It was common ground that at the end of the lease (in February 2011) there were dilapidations. The extent of those dilapidations and the total cost of remedying the breaches (£402,887.86 as at the date of termination of LBHF’s lease) was not disputed.

In September 2016, four months before the trial, the expert surveyors for the parties inspected the subject property and concluded, again without any substantial dispute between them, that the former landlord had carried out works to the value of £183,897.86. Between the inspection date and the date of the trial no further work was carried out by the landlord. The experts also agreed that, where units had been re-let following the termination of LBHF’s lease, their state of repair had not prevented a market value rent being obtained.

The case turned on the application of s.18(1) Landlord & Tenant Act 1927. The claimant former landlord argued that it should be entitled to recover both the cost of the work which it had already carried out and also the cost of the works which had yet to be completed. It was contended by counsel for the former landlord that the failure to complete the outstanding works was explicable on the basis of lack of finance and a desire not to disturb underlessees in occupation of the units. LBHF contended that the damages claim was limited under s.18(1) of the 1927 Act to the cost of the work actually carried out.

Mr Stepehen Furst QC, sitting as a judge of the High Court, found (at [37]) that there was no proper explanation why the outstanding works had not been completed. The Claimant’s submissions by its counsel were not supported by any evidence. There was no evidence as to when the works would be carried out. Further, the expert evidence suggested that the failure to carry out the works had made no impact on the rent obtainable for the units. Consequently, applying s.18(1), the diminution to the former landlord’s reversion was the cost of the works actually done and the claim was capped at that figure.

This decision is plainly correct, applying as it does the principles set out by the Court of Appeal in Latimer v Carney [2006] 3 EGLR 13. It is a stark warning to landlords that the presentation of an impressive schedule of dilapidations is not enough. If the works on the schedule have not been substantially completed by trial, and especially where there is no compelling evidence to justify the delay, then the damages claim risks a brutal pruning by the Courts.

James Browne / 26th Apr 2017


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