419-1587-Clerksroom-RRD-Stephen-Pritchett

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It is suggested that the following analysis will apply in this context. Firstly, the tenant will be in breach of his reinstatement obligations under the first lease at the latest by the date upon which the first lease is surrendered by operation of law in favour of the grant of the second lease. Second, the landlord’s cause of action will probably be a specialty and therefore last for 12 years from the date of the breach. Thirdly, assuming that the second lease merely refers to alterations made during “the Term”, this would not ordinarily extend to alterations made during a prior lease. Fourthly, therefore, by the time the second lease comes to an end [depending upon its length] there may be limitation issues with regard to enforcement of that cause of action. Fifthly, even if the historic breach of the reinstatement obligation under the first lease is not statute barred, the tenant will inevitably argue that it would be unreasonable to award damages for that historic breach because the landlord retained a tenant paying rent in the premises as altered without any reinstatement costs having been incurred by the landlord. Whether this argument is properly categorized as a prima facie measure of damages argument or a decision based upon Ruxley and the reasonableness of expenditure for nil return is debateable. It would be argued that the relevant cause of action for these purposes is the one under the first lease and that the landlord cannot elide the need for reinstatement under the second lease [but the absence of a power to require it] with the obligation and breach under the first lease and thus claim damages at the end of the second or third lease referable to the cost of reinstatement at that time. Section 18 will not apply in terms to a claim in reinstatement and accordingly the true measure of damages is the cost incurred by the landlord in remedying the breach. The damages which flow from a breach of a reinstatement obligation should be assessed at the date of the breach and here the relevant breach occurred many years ago and gave rise to no loss to the landlord. Thus, on behalf of a landlord, upon successive leases it is important to ensure that the reinstatement obligation covers alterations made during the term and any prior term or period of occupation by that particular tenant. On behalf of the tenant it will be important to seek to limit the reinstatement obligations to those carried out during the relevant term only and to exclude any wider reinstatement obligations in the successor lease. STEPHEn J PriTcHETT monday, 7 January 2013 www.chancerycounsel.co.uk Clerksroom is a trading name of European Administration Limited Registered Office: Equity House, Blackbrook Park Avenue, Taunton TA1 2PX. Registered in England: 04207276
www.clerksroom.com Administration: Equity House Blackbrook Park Avenue Taunton Somerset TA1 2PX DX: 97188 Taunton Blackbrook TERMINAL DILAPIDATIONS – is the cost of repair invariably the measure of damages? The third in a trilogy of commentaries by Stephen J Pritchett, Barrister at Clerksroom on issues specifically affecting retail tenants. (7 January 2013) Clerksroom is a trading name of European Administration Limited Registered Office: Equity House, Blackbrook Park Avenue, Taunton TA1 2PX. Registered in England: 04207276 T: 0845 083 3000 F: 0845 083 3001 mail@clerksroom.com www.clerksroom.com THE SCENARIO The end of the lease looms. The landlord serves a schedule of terminal dilapidations which hits the doormat with a large thud. Every conceivable item of work or repair has been itemized by an overzealous building surveyor upon instructions from the landlord. A settlement is achieved and money changes hands. Months later there is no sign of any substantial works having been carried out to the majority of the premises and they are being marketed at the old passing rent. > Tenants have a right to remove tenant’s fixtures which have been added to demised premises during an old lease and also during any statutory continuance of that lease up to the date upon which a second lease is granted SUMMARY OF APPLICABLE PRINCIPLES > The measure of damages for breach of covenant to repair is the cost of the works necessary to remedy the breach > The cost of works as a measure is however subject to the statutory cap upon damages under section 18 Landlord and Tenant Act 1927 which limits the damages to the diminution in value to the reversion caused by the dilapidations > The Court is not ordinarily concerned with what a claimant does with his damages; the claimant is perfectly entitled to claim the cost of repairs and then decide not to carry out the works and pocket the damages. > Where the landlord has not done the necessary works and has no intention of doing so, the costs of works will not be any realistic guide to the landlord’s loss and the landlord will need to prove an actual diminution in value.
Page 1 and 2: Reinstatement, Repairs and Damages
Page 3 and 4: ANALYSIS The Chancellor accepted th
Page 5 and 6: In more usual circumstances where t
Page 7 and 8: He said that this had been the law
Page 9: It is suggested that in the usual c
Page 13 and 14: Thus as a matter of valuation it is
Page 15: the service the people the quality

419-1587-Clerksroom-RRD-Stephen-Pritchett

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