Disrepair and Supersession: These two concepts are usually fundamental to a tenant’s dilapidations liability but are much misunderstood. In the first of two articles, Jon Rowling FRICS FCIArb, Technical Partner at Tuffin Ferraby Taylor LLP (TFT), responsible for the dilapidations, service charge and dispute resolution services, uncovers some of the lesser-known features of the obligation to repair:
Part 1: Repair: all it’s cracked-up to be?
The vast majority of commercial leases will require the tenant to repair the premises, at least to some extent. But ‘in repair’ can mean quite different things, depending on the circumstances.
An obligation to repair can mean an immediate requirement to carry out works: Premises can be in disrepair the moment the tenant starts occupation; the state of repair at that moment does not set a standard for the remainder of the lease term (unless that is what the lease stipulates).
Two leases with identical repair clauses can impose quite different obligations on the respective tenants: The age, character and location of the premises at the start of the lease term sets the standard of repair throughout the term. So, defects in a building which was old and secondary at the start of the lease term might well not represent disrepair; but, even if the repair clause is identical, the exact same defect might represent disrepair in a building which was a new headquarters building at the start of the lease term.
Repair, in subsequent leases, might mean less than it originally did: If a tenant takes a series of leases of the same building, the standard of repair during the first lease might be high but, under each subsequent lease, as the age of the building increases, that standard will probably step down (unless the lease states otherwise).
A dangerous building might not be in disrepair: Unless there has been damage or deterioration from a former state there is no disrepair. For example, a recent case has identified that a staircase, dangerous because of the lack of a handrail, was not in disrepair.
A building with latent defects is not in disrepair: A badly-built building is not in disrepair unless and until there is damage or deterioration; latent defects need to convert to patent defects before there can be a breach of the repair covenant. First tenants of new buildings should therefore obtain warranties to protect their position.
‘Good repair’ doesn’t necessarily mean ‘Good Repair’: Terms such as ‘good’, ‘good and substantial, ‘good substantial, ‘good tenantable’ etc tend not to be given much emphasis when a tenant’s repair obligation is interpreted. The standard of repair, as previously mentioned, relates to the age, character and location of the premises at the start of the lease term.
Schedules of condition: First a plea; schedules of condition are usually an awful means by which to limit a tenant’s obligations, please stop referring to schedules of condition in leases! (and, anyway, shouldn’t they be called ‘schedules of disrepair’?). Schedules of condition are usually referred to in order to limit a tenant’s repairing obligation. Usually though they are not referred to in the decorations clause or in the yield up clause, the documents themselves are poorly drafted (the surveyor will probably have omitted the roof and the M&E, phrases such as ‘generally fine’ will have been used and then the document will have been photocopied a few times or lost completely). And then nobody really knows how to interpret a repair clause limited by a schedule of condition; is there a difference between a ceiling and a floor (i.e. respectively the tenant not being obliged to hand back the premises in any better level of repair as opposed to the tenant being restricted from allowing the premises to fall below the level of repair shown in the schedule) – eminent opinions differ on this question. Imagine an item which is referred to in a schedule of condition as being in fairly poor condition, at the end of the lease it is probably in slightly worse condition. Is there a beach? If so, how much should the tenant pay, for the whole repair or for a proportion of the repair based on the amount of deterioration? Did I mention that schedules of condition are awful?
Fair wear and tear exclusions: Occasionally a tenant’s obligation is limited by a fair wear and tear exclusion. This is usually a significant benefit to a tenant, probably partly because these exclusions are easier to deal with than a schedule of condition. Damage or deterioration caused by natural weathering or by the use of the premises in the manner anticipated is not the tenant’s responsibility. That is much easier to analyse than the content of a schedule of condition. It is sometimes argued (by eminent voices it has to be said) that fair wear and tear exclusions are not very good because if, for example, a roof tile fell off because of weathering, the tenant (whilst not being required to replace the tile) would still have to repair the internal water damage and so would inevitably also replace the tile. Could the same criticism not also be aimed at schedules of condition though?
Condition: Modern leases often extend the repair obligation by reference to a condition obligation. This has been held to be a separate but related obligation which is also subject to the age, character and location tests. However, a condition obligation might well be more onerous than a repair obligation.
Rebuilding and renewing: Tenants who have signed up to obligations which extend to a requirement to rebuild and/or to renew are also probably exposing themselves to a greater potential liability than would be imposed by a repair obligation.
S18(1) of the Landlord and Tenant Act 1927: No article would be complete without reference to this statute, which applies in England and Wales. It is generally accepted to comprise two ‘limbs’, both of which can be characterised as controversial; the first limb caps damages claims for disrepair by reference to diminution in value (if any) caused by the breaches, and the second limb can extinguish damages claims in circumstances where the landlord intends to pull the building down or carry out structural alterations. Some argue that there are not two limbs, that limb two is an example of limb one; it is possible that limb two only applies when the landlord’s works relate to the whole of the premises; some eminent voices suggest that s18(1) would also relate to condition and decoration obligations and other eminent voices suggest that it does not. Oh well, s18(1) is only ninety years old so I expect it won’t take much longer before we get some clarity!
How does the tenant remedy the disrepair; patch repair or replacement? This is often the question which is asked when somebody wants to know whether the concept of ‘supersession’ kicks in. I’m afraid it is the wrong question to ask, sorry.
In the next article I will discuss how breaches should be remedied and, when the landlord carries out remedial work, under what circumstances would that remedial work supersede the landlord’s claim for the breach of the tenant’s obligation.
