Transcript Document

LLM Advanced Commercial Property Law
2009
REPAIR AND DISREPAIR OF
COMMERCIAL PROPERTY
Siân Lee
Course outline
• Workbook
• Cases/articles
• Blackboard (e-Learning Portal)
Introduction
• Repairing obligations as between
landlord and tenant in a commercial
lease
• Some selected topics:
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1 - Overview
2 – Key concepts and case analysis
3 – Drafting issues
4 – Landlord’s remedies
Repairing Covenants:
Overview
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Implied obligations
Tenant’s covenant
Design/Construction defects
Amendments to draft covenant
Access by landlord
Landlord’s covenant to repair
Ancillary covenants
Remedies
Key concepts
• Repair
– Dictionary definition?
• Disrepair
• Renewal
• Defect
– Inherent defect
• Improvement
Concepts and cases
• Little statutory guidance
– Case-based reasoning
• Look for judicial distinctions between
concepts
– Trace themes through cases, rather than expect
each issue to dealt with by a particular case
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“Fact and degree” arguments
Examples: facts
Examples: drafting
Look at some cases/themes:
– Standard of repair
– Repair vs renewal
Cases
• Proudfoot v Hart (1890)
- T’s covenant he would keep premises
in “good tenantable repair and so leave
the same at the expiration thereof” (3
year lease)
- T’s obligation to put and keep premises
in such repair having regard to age
character locality, making reasonably
fit for occupation by tenant of class
likely to take it.
Cases
• Lister v Lane and Nesham (1893)
- T’s covenant “…well, sufficiently,
substantially repair uphold maintain…”
- House was +100 years old. Walls bulged
due to timber in foundations decaying –
resting on boggy soil
- Surveyor – not economic to repair without
demolition/rebuilding, but this might have
been done during term
- Held: T not liable, since caused by
time/elements on defective construction
Cases
• Lurcott v Wakeley and Wheeler (1911)
- Lister distinguished – if repair of whole
impossible, then repair covenant does not
carry obligation to renew or replace
(Buckley LJ)
- Although repair can contain elements of
renewal, repair and renewal are distinct
concepts.
- But repair can include replacement of
parts (fact and degree?)
Cases
• Anstruther-Gough-Calthorpe v McOscar
(1924)
- Proudfoot distinguished: standard of repair
does not apply for long lease (95 year (here)
vs 3 year lease)
- Applying Proudfoot rule would mean a
fluctuating standard of repair – depending
on improvements to tenants/neighbourhood
(not in question in Proudfoot)
- Look at ordinary uses at start of lease…
Cases
• Anstruther-Gough-Calthorpe v
McOscar (1924) (cont’d)
- “Repair… connotes the idea of making
good damage so as to leave the subject
so far as possible as though it had not
been damaged. It involves renewal of
subsidiary parts; it does not involve
renewal of the whole”
Cases
• McDougall v Easington BC (1989)
– Fundamental flaw in design/build
remedied by removal of front and rear,
roof, windows, doors, interior fittings
– T’s appealed first instance decision that
works did not qualify as (L’s) repairs.
Held: not repairs.
– No attempt to reconcile whole body of
authority with single statement of
principle
Cases
• McDougall v Easington BC (1989) (cont’d)
– Three tests for renewal vs repair (apply
separately or concurrently as case demands;
take into account nature of premises,
condition at start, terms of lease):
• 1. alteration of substantially whole or a
subsidiary part?
• 2. whether wholly different character of
building produced or not?
• 3. ratio of costs to previous value, and
effect on value/lifespan of building?
Cases
• McDougall v Easington BC (1989) (cont’d)
– Here the works gave “building a new life in
a different form” – so not simply repairs
• Comment
– An extreme case upon which to base tests?
– How useful are the tests (when to apply –
separate, concurrent?)
– Do terms of tests give rise to more
problems – substantial, subsidiary,
character?
Cases/concepts
• Looked at themes of
– Standard of repair
– Renewal vs repair
• Look at some leading repair cases,
which give rise to some surprising
principles:
– Ravenseft v Davstone (inherent defects
can fall under repairing covenant)
– Post Office v Aquarius (basement flooded
but property not out of repair)
Ravenseft v Davstone
• [1979] 1 All ER 929
• Facts:
– 16 storey block of maisonettes erected 19581960 – looked like a “set of pigeon holes”
– reinforced concrete frame with stone
claddings; not practice at time to use
expansion joints (but stone cladding and
concrete frame have different coefficients of
expansion); also stones not properly tied in
– part of cladding bowed away from frame
Ravenseft v Davstone
– In 1973 some of cladding was observed to
be loose and danger of falling
– Plaintiff landlord took responsibility for
remedial works (defendant tenant
disputed liability but assisted with
inspection of works)
– (By 1973 it had become standard practice
to include expansion joints in construction
of buildings like this)
Ravenseft v Davstone
– Tenant’s repairing covenant was lengthy
and tried to cover all eventualities (see
case)
• Tenant’s argument:
– the doctrine of inherent defect applies to
tenant’s covenants of repair –
– i.e. where disrepair arises from an inherent
defect of the demised premises, the result
of the defect cannot fall within the tenant’s
obligation to repair
• Plaintiff: no such doctrine; just ask if works
fall within “repair”
Ravenseft v Davstone
• Judge’s reasoning:
– no need to reconsider Proudfoot, since
not about standard of repair – here
concerned with what falls under “repair”
– Note Lister v lane (Lord Esher) – however
large words of covenant it is not a
covenant to give back a different thing
Ravenseft v Davstone
• Judge’s reasoning:
– Reviewed (old) authorities - e.g. Sotheby v
Grundy – question is one of degree for result
of inherent defect - partial collapse brings
within covenant, total collapse falls outside
– Concluded that cases do not support the
doctrine that disrepair caused by inherent
defect gives tenant complete defence;
instead it is a matter of degree…
– Comes back to Lister v Lane: whether repair
or giving back wholly different thing
Ravenseft v Davstone
• Judge’s reasoning:
– To assist use ratio of cost of works to
value of whole premises (see criterion in
McDougall)
– Cost of works £55K; £50K for refixing
stones and £5K for inserting joints; value
of building £3m.
• Held – tenant liable for full cost of
works
See also (inherent defects)
• Stent v Monmouth (1985)
• Creska v Hammersmith & Fulham LBC
(1998)
• Quick v Taff-Ely (1985)
….. disrepair
Post Office v Aquarius
• [1987] 1 All ER 1055
• Facts
– “highly unusual”
– New office building let in 1969
– Defect in structure of basement due to use
of porous concrete and defective
construction joints; 1979-1984 water table
rose and basement flooded
– 1984 water table subsided again; basement
dry; no damage caused by the defect
Post Office v Aquarius
• T’s repairing covenant in fairly
standard form
• First instance: three schemes of
treatment considered; waterproofing
substantial structural addition; cost
twice annual rent (15% value) – not
repairs
Post Office v Aquarius
• L’s appeal that (a) works did not produce
wholly different thing (b) substantial
additions/alterations/improvements can be
repairs if only reasonable way to remedy
• Ravenseft referred to: repair can require
remedying inherent defect in a building
(matter of degree)
• Quick v Taff-Ely referred to: disrepair related
to physical condition not lack of amenity
Post Office v Aquarius
• Ralph Gibson LJ: when water entered damage
could have been done; this would be disrepair;
no such damage proved; since no disrepair, no
liability arisen under tenant’s covenant
– Proudfoot does not hold T liable merely to
improve so as to remove defect
• Slade LJ: clear words are needed to impose
obligation on tenants to remedy defects in
original construction, before they have caused
any damage
• Landlord’s appeal dismissed
Click on this slide to see
The diagram of case analysis
(the Word document will open in a new window)
Drafting
• Amendments – commercial lease,
repairing covenant, e.g.
“Repair and cleaning
To put and keep the Property in repair
and keep clean neat and tidy”
Drafting
• Landlord’s amendments?
• Tenant’s amendments?
• Further instructions?
Drafting Issues
Anatomy of a lease
Parties
Definitions/Interpretation
Demise/Rent
Tenant’s covenants
e.g. Repair, User, Alienation, Insurance,
Insurance, Alterations, Signage
Landlord’s covenants
Provisos
e.g. Forfeiture
Schedules
e.g. Rent Review, Service Charge
Drafting Issues
• Which clauses interact with the tenant’s
repairing covenant (and why)?
– ………….
– ………….
– ………….
– ………….
– ………….
– ………….
– ………….
Drafting Issues
• “Demised Premises”
– Lease of whole
– Improvements and additions?
– Lease of part (internal demise)
• e.g. Top floor/ground floor obligations
Drafting Issues
• “Demised Premises”
– Building up definition of “internal
envelope” (e.g. for retail unit):
– …………….
– …………….
– …………….
– …………….
– …………….
• HM Land Registry/plans
Drafting Issues
• Sample tenant’s repairing covenant:
“To keep the Demised Premises in
good and substantial repair”
• Tenant’s amendments?
(Click on the slide to view the Word document,
which will open in a new window)
Styles of drafting
What impact does style of drafting
have on repairing obligations?
• See the covenant in Post Office v
Aquarius Properties Ltd [1987] All
ER 1055
– Impact of other terms not considered?
Styles of drafting
• See Norwich Union v BRB [1987] 2
EGLR 137
– Hoffman refers to ‘torrential drafting’
(numerous words have same effect)
• See Credit Suisse v Beegas
Nominees [1994] 5 All ER 803
– ‘fairly torrential’ – not in good condition
whether or not out of repair
Styles of drafting
• See Welsh v Greenwich [2000] 3
EGLR 41
– Sparse drafting but “condition” had
separate effect, adding to “repair”
– Social landlord?
Click on this slide to see
The diagram of case analysis
(the Word document will open in a new window)
Landlord’s Remedies
• What remedies (potentially) does the
landlord have available to it in the
following situations?
– (a) the tenant has not paid the last two
months’ rent
– (b) the property is in an unsightly and
dangerous state of disrepair.
Landlord’s Remedies
(a) ………………….
……………….
…………………….
……………………
…………………
…………………
(b) …………………
……………….
………………… ..
……………………
……………………
…………………
…………………
…………………
Landlord’s Remedies
• Consider non-payment of rent
– Rent deposit?
– Guarantor/former tenant?
– Landlord and Tenant Act 1954?
• S30(1), ground (b)
– Action
Landlord’s Remedies
• Consider non-payment of rent
(continued)
– Insolvency/statutory demand
– Distress
• Human Rights implications?
– Collection from subtenant?
– Forfeiture?
Landlord’s Remedies
• Consider breach of repairing
covenant
• Damages
– Usually governed by Hadley v
Baxendale (1854) 9 Exch 34
• Recover losses arising naturally from
breach; or
• Supposed to have been contemplated by
parties at time entered lease as probable
result
Landlord’s Remedies
• Damages (cont’d)
– Ceiling on amount of damages for breach
of repairing covenant by virtue of s18
Landlord and Tenant Act 1927:
• Doesn’t apply to covenant to reinstate
• Cannot exceed amount by which reversion
diminished by the breach
• Common elements in damages claim:
– Cost of necessary works
– Costs of supervision of works
– Lost rent during works
Landlord’s Remedies
• Damages (cont’d)
– Ceiling on amount of damages for breach
of repairing covenant by virtue of s18
Landlord and Tenant Act 1927 (Cont’d):
• If during term, reduction in reversion value a
function of unexpired lease (longer the
remainder the less the reduction in value of
reversion)
• If proceedings at end, court may accept cost
of repairs as measure of damages (subject to
s18)
Landlord’s Remedies
• Damages (cont’d)
• Ceiling on amount of damages for breach of
repairing covenant, relevant factors:
– Basis of valuation
• E.g. 5 storey 1970’s office block in satellite
town to city. In disrepair at end of lease. On
what bases may it be valued?
•
•
•
•
…………………
…………………
…………………
………………… (see Ultraworth case – next slide)
Landlord’s Remedies
• Damages (cont’d)
– See Ultraworth Ltd v General Accident
Fire & Life [2002] 2 EGLR 254
• valuation bases
– Section18 (1) also provides that no
damages available for failure to repair
if premises to be pulled down shortly
after termination (or works would make
repairs valueless)
Landlord’s Remedies
• Damages (cont’d)
– Is it straightforward to sue for damages on
breach of repair?
– Leasehold Property (Repairs) Act 1938, s1
• If lease granted for 7+ years with 3+ years
to run, then
• Must serve notice under s146 LPA 1925
and
• Tenant has right to serve 28 day
counternotice, then leave of court needed
by Landlord (see forfeiture)
Landlord’s Remedies
•
•
•
•
Forfeiture
Meaning?
Not an implied right
Commercial considerations?
– ……………….
– ……………….
– ………………
Landlord’s Remedies
Forfeiture (cont’d)
• Generally s146 notice to be served
for any breach
• Notice contains:
- Identity of tenant, premises, covenant,
breach, compensation
- Options/action depending on whether
remediable/irremediable
Landlord’s Remedies
Forfeiture ( cont’d)
• Irremediable breaches
– ……………
– ……… ……
– ……………
Landlord’s Remedies
Forfeiture ( cont’d)
• Remediable breaches
– ……………..repair
– ……………..Breach of user??/keep
open
– …………….. Commission of nuisance
– …………….non-payment of sums due
Landlord’s Remedies
Forfeiture ( cont’d)
• Waiver of breach – can be implied
from conduct
– once and for all (irremediable?)
breaches can be waived
• Lose right to forfeit
– Continuing (remediable?) breaches –
each day constitute continuation of
breach
• Fresh s146 notice needed
Landlord’s Remedies
Forfeiture ( cont’d)
• Re-entry – court proceedings or peaceable
• Section146 notice to be properly served
– See s196(3), (4) LPA 1925
• For repairing covenant special s146 procedure
governed by Leasehold Property (Repairs) Act
1938
– 7+ year lease, 3+ to run
– Tenant’s 28 day counternotice
– Leave of court needed (see s1 of 1938 Act)
Landlord’s Remedies
Forfeiture ( cont’d)
• Leave of court under 1938 Act granted if
Landlord makes out 1 of 5 grounds:
•
•
•
•
•
………………
………………
………………
………………
………………
• Tenant can claim relief
– s146(2)
– s147
Landlord’s Remedies
Specific Performance
• Equitable remedies – characteristics
– …………..
– …………..
– …………..
• Specially suited to real property
• Specific performance:
– Equity regards as done that which ought
to be done
Landlord’s Remedies
Specific Performance (cont’d)
• Case where specific performance
considered to enforce tenant’s
covenant:
– Co-operative Insurance Society Ltd v
Argyll Stores (Holdings) Ltd [1997] 23 EG
137
• Is specific performance available for “keep
open” covenant?
Landlord’s Remedies
Specific Performance (cont’d)
• Compare Argyll Stores case with case
about repairing covenant:
– Rainbow Estates Ltd v Tokenhold [1999]
Ch 64
• How do the courts’ reasoning compare?
Landlord’s Remedies
“Self-help”
• See case of Jervis v Harris [1996] 1
EGLR 78
• How does this address problems with:
– Damages
– Forfeiture
– Specific performance
Overview & Close