A Damage Case

Whether you are a landlord or a tenant, one issue that should concern you come the end of any ease term is the question of dilapidations.

Most standard commercial leases will contain a covenant requiring the tenant to deliver up the premises to the landlord at the end of the lease term in repair.
Usually the parties will have drawn up a condition report at the start of the lease term detailing the state of the property at the start of the lease.

So what happens if the tenant comes to the end of the lease term and hands back the property in disrepair? In practice, the landlord will usually settle for a payment calculated by reference to what it is going to cost him to fix up the property himself. Often tenants are happy to deal with dilapidations in this way. The landlord will appoint a surveyor.  The tenant will appoint a surveyor. The two surveyors will examine the property and then get together to agree a fair figure.

But what if the landlord does not intend to re-let the property when he gets it back but wants to make structural alterations or even demolish the property altogether? Is he still entitled to pocket a sum for dilapidations from the tenant even though he has no intention of using the money to carry out repairs?

These cases are a lot more tricky. In England Section 18(1) of the Landlord and Tenant Act 1927 provides that no damages are recoverable from the tenant in these circumstances. But this legislation does not apply to Northern Ireland and there is no equivalent legislation here. As a result I have seen it argued that landlords are free to recover for dilapidations here even where they clearly have no intention of carrying out repairs.
My own view is that this cannot be correct. Yes the tenant is in breach of covenant for not handing back the property in repair. Yes the landlord is entitled to recover damages for breach of the covenant to repair. But damages must be calculated by reference to the loss suffered by the landlord and if the landlord has no intention of carrying out repairs he has suffered no loss. In these circumstances my view is the landlord can recover only nominal damages if he is entitled to recover any damages at all.

If you would like to discuss any of the issues raised in this article, please contact Michael McCord, Partner, Litigation Department, on Belfast 028 9055 3314 or by email, michael.mccord@tughans.com.