14th June 2017
Damages limited to costs expended in dilapidations claim
Just a reminder to all landlords involved in Dilapidations claims to ensure that they carry out a Section 18 (1) valuation before embarking on proceedings. The High Court in Car Giant Limited, Acredart Limited v the Mayor and Burgesses of the London Borough of Hammersmith  EWHC 197 (TCC), provided a timely reminder to landlords that dilapidations claims may be limited to works carried out at a tenant’s property, and then further discounted.
The parties entered into a lease for a term of 25 years. The lease included a covenant for the tenant to yield up in good and substantial repair. The property was a dilapidated industrial warehouse consisting of 35 units.
The landlord’s claim was for the total costs of the works to remedy the breaches (£402,887.86) however, in respect of works already carried out, the landlord had only spent £183,897.86.
The landlord argued that the diminution in value was £500,000. The defendant argued that the landlord’s claim should be limited and relied upon Section 18 (1) of the Landlord & Tenant Act (1997).
The Judge held that the starting point in assessing damages was to establish the difference between the value of the property at the termination date of the lease as if the property was in a state of disrepair, and as if the property was in repair, and then to further discount from that. In this instance, the Judge discounted further for the following reasons:-
- The landlord had let the property at a market rent, which suggested that the quality of the works proposed were not important or necessary;
- The landlord had given no explanation as to why the works had not carried out for a period of 6 years following the termination of the lease; and
- The landlord had failed to include, within its evidence, the sums for the preparation and service of the Schedule of Dilapidations, drainage report and any professional fees.
Accordingly, the landlord was only awarded damages limited to £166,000 together with the costs of repairing the defect Schedule of £13,125 which would have been prepared in any event irrespective of the state of the property.
This decision is a timely reminder to landlords who are seeking to issue proceedings against tenants for dilapidations to ensure that they get early advice in relation to the Section 18 (1) valuation prior to carrying out works to the property.
For further information, please contact the Real Estate Disputes Team at Hamlins.