The Property Litigation Team has successfully represented a commercial property owner in a High Court claim for damages against its former tenant. The tenant was a local authority that had occupied our client’s property (a substantial Georgian property with extensive grounds) under a series of leases stretching back over 40 years. The leases contained repairing and reinstatement obligations, some of which varied between the various leases.
The local authority did not carry out any repairs or reinstatement at the end of the lease. Our client issued a claim in the Chancery Division for post terminal dilapidations based on a cost of repair and damages of almost £1m.
The tenant did not dispute that it was liable for some damages, but alleged that its liability was limited by reference to its final lease and not the preceding leases. This was particularly important because during previous leases the property became a Grade II listed building and the tenant carried out extensive alterations and construction of outbuildings. This not only impacted on the required standard of repair (as Listed Building Control would require work to be consistent with the property’s listed status), but also on the interaction between an item being out of repair and the cost of reinstatement.
There were also material differences between the parties as to the diminution in value of the property consequent upon the required repair / reinstatement. It was not in dispute that, commercially, the only realistic option for our client was to convert the property for residential use and to develop the grounds for housing. The tenant argued that the costs of conversion would be substantial, involving consequential issues of supersession, such that the residual value of the property was minimal, regardless of the condition in which the tenant had left it. Our client (which was a company with a track record of redevelopment of listed buildings) argued that its conversion costs were realistic when based on the property being left in repair / reinstated in accordance with the lease.
The claim was listed for a 5 day trial in February, but the afternoon before the trial was due to commence the tenant capitulated, paying very substantial damages and costs to our client.
The Property Team was lead in the case by Iwan Doull.
Please contact us if you would like more information about the issues raised in this article or any aspect of property dispute resolution law at 029 2034 5511 or idoull@berrysmith.com
