Disputes over the responsibility for repairs are holding up a substantial number of relocations, according to specialist commercial law firm, stevensdrake.
Ian Price a partner at the Sussex based firm and member of the Property Litigation Association, said: "Moving premises is expensive enough, but the experience can be crippling when faced with a large repair bill from your old premises. In most cases, the landlord has served a schedule requiring tenants to carry out a number of what are often expensive repairs, sometimes just at or after lease end with no intention to do the works, as a way of maximising the landlord's return in a poor market."
Liability for such repairs depends upon the terms of the lease. It may allow the landlord to do the work before you leave and claim their cost. In other cases, for disrepair in breach of an obligation upon the tenant to repair, their claim is for the cost of repairs and any consequential loss, ie loss of rent. However, liability is capped at the amount by which the disrepair diminishes the value of the landlord's reversion. In addition to the lease terms, a landlord can also claim you have damaged the premises or allowed it to fall into decay.
Ian Price says there are questions you need to ask yourself:
What does the lease say?
Repair, improve, renew or rebuild? Are any of the items claimed actually the Landlord's responsibility? The lease may make them responsible for the structure or exterior and they can only pass those costs on if the service charge allows and they have done the works in time.
What are your Landlord's plans? Has planning been applied for, perhaps to redevelop? Has the Landlord spent any money near the end of the Lease on the building, if they have not, that could well indicated their intention to redevelop. A definite intention to pull-down or structurally alter the premises, irrespective of its condition, rendering repairs valueless under the section 18 statutory cap. Even if the Landlord does not have these plans, if the best market for the property is for development, that may render the diminution nominal. Fit out plans of a new tenant could supersede your repairs, with scope for settling for less.
Is there time to do the works?
You may be able to complete them for less then the Landlord claims; indeed, beware landlords looking to make a profit by carrying out repairs through related companies. Or would offering a financial settlement cost less? Based on the lowest cost of the cheapest method of repair a tenant can choose, or because the section 18 statutory cap is less? However, does your lease allow your landlord to serve notice and then go in themselves and repair and claim back their costs, because the statutory cap will not apply against such a claim, and in this case, it may be better to start the works yourself.
Does your lease or licence to alter make you responsible for removing alterations? If so, expect the landlord to claim these costs whether in disrepair or not. If not, they become part of the building and subject to the same repair covenants.
You will also need a surveyor / valuer to provide and negotiate repair costs and value the diminution, which could be substantially less then the cost of the works. Indeed, if the premises could be sold at the same price, irrespective of disrepair, there may be no diminution or liability!
As a final point, check if your lease had a schedule of condition with it, requiring you to repair to that standard, otherwise you may end up paying for putting it into a better condition then when you moved in. 'Repair' means putting it back into the condition it was in when constructed, not when your lease started, taking into account age and surroundings, and to put or keep in repair means to do so even if it was not when you moved in.
Repair should not mean improvement, but if a latent defect caused damage, and fixing the latent defect is the proper way to repair the damage that defect causes once and for all, then you could easily end up liable for the cost of handing back a building in a much better condition than when you went in or when it was built, at your great expense. For some, this advice will be too late, but for all, this should serve as a timely reminder to look carefully at the lease before signing it and most importantly, take professional advice - failure to do so could be an expensive mistake.
Published - June 2009
This article is provided for general information only. Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.
