Tenant Fails to Limit Repair Costs

When a tenant left the premises it had occupied but did not comply with its obligations under the lease to put the property back into a good state of repair, the landlord sued the tenant to recover the cost of the repairs it was necessary to carry out.

In such circumstances, the law allows the landlord to recover the reasonable cost of the repairs and the loss of rental income whilst they are being carried out.

However, the damages payable by the tenant are capped (by the Landlord and Tenant Act 1927) at the loss in value of the premises as they have been left by the tenant compared with their value had they been left in good repair.

The High Court ruled that the cost of the repairs was less than the difference in the value of the premises, so the cap did not apply. The tenant appealed, arguing that the landlord’s repairs included some improvements to the premises and therefore the cap should have been set at a lower level – reducing the sum payable. Having heard expert evidence concerning the value of the premises on both bases of valuation, however, the Court of Appeal concluded that the cost of the repair work was less than the diminution in value and that the repairs did not constitute improvements. The cap was therefore not in point.

If you are vacating premises under a ‘repairing’ lease, it often makes sense to agree the terms of the exit with the landlord in advance of the termination of the lease. We can assist you in the negotiations and help you to protect your legal position.