Understanding the Scope Of The Tenant’s Responsibility To Repair (free chapter from ‘A Practical Guide to the Law of Dilapidations’ by Mark Shelton)

CHAPTER ONE
UNDERSTANDING THE SCOPE OF
THE TENANT’S RESPONSIBILITY
TO REPAIR

Content

This chapter examines the extent and nature of the tenant’s repairing obligation, including considerations as to interpretation. It also looks beyond the general covenant to repair, to consider other covenants which are relevant to the physical condition of the property.

The repairing obligation is one of the most important elements of a lease, and it will always be expressly provided for, to some extent. In the unlikely event that it is not, the courts are not in the habit of implying repair obligations into leases. Obligations on the landlord as to the repair of specific elements of premises are implied into shorter residential leases by s.11, Landlord and Tenant Act 1985, though that is outside the scope of this book. Exceptionally, the courts have been prepared to imply an obligation, again on a landlord, where the repair of some element of the building is not provided for at all. As regards tenants’ repairing obligations, though, it may be taken that in identifying the nature and extent of the obligation, we are concerned only with the content and interpretation of express repairing obligations.

The natural starting-point is the covenant to repair, but other relevant covenants in the lease should not be overlooked.


Covenant to repair

Typical content

In a commercial lease, the tenant will usually be responsible for repair and, in the case of a lease of a whole building, historically the obligation has typically been a ‘full’ one. The expression ‘full repairing obligation’ in this sense means an obligation extending to all elements of the building, including major items like the foundations and the roof, whether or not any disrepair pre-dated the grant of the lease.

That said, it is increasingly common for the scope of repairing obligations to be limited. Whereas in the 1980s commercial leases were typically as much as 25 years in duration, the average length of commercial leases being granted now is around six years. Twenty-five years is a significant part of the life of a building, and it might be reasonable that a tenant under a 25-year lease should assume responsibility for major structural elements. However, that is very hard to justify in a lease for six years or even less. Increasingly tenants may seek to exclude such elements from their repairing obligation, or limit their repairing obligations by reference to a schedule of condition, so that they are not responsible for any disrepair pre-dating the grant of the lease.

In the case of a letting of part of a building, or part of a development, it is usual for the landlord to have responsibility for the repair of the common parts. It is simply impractical, for example, for each tenant within a shopping centre to be responsible for the repair of one part of the roof. However, it is still the tenants who will pay for any repair work undertaken by the landlord, through the mechanism of the service charge. In such a case, the tenant is likely to have an ‘internal repairing obligation’ only (the term ‘full repairing obligation’ is also used by way of contrast to ‘internal repairing obligation’).

Internal repairing obligation’ is a shorthand expression, and the extent of the premises within the tenant’s demise, and therefore included within its repairing obligation, will usually be defined. Even in the case of whole-building leases, though, where the repairing obligation will generally be expressed to cover the whole property, attention should still be paid to precisely what is included within the demise. Does it, for example, include subterranean structures and facilities, such as pipes and drains? In certain cases where it is known or anticipated that there may be issues with contaminated land, and the tenant is not prepared to take on any liability for that, the demise may extend only to the surface of the land, and exclude anything beneath; this is known as a ‘pie-crust lease’.

A tenant’s repairing obligation typically falls into two parts: an obligation to keep the property in repair throughout the term of the lease, and an obligation to leave the property in good repair at the end of the lease. Claims for breach of repairing covenant are mainly brought at the end of the lease (a ‘terminal dilapidations claim’), at which time the landlord can rely on both obligations. Until then, it is only the ‘throughout the term’ obligation which can be relied upon.

Drafting style

In the past, repairing obligations have often been excessively wordy. To take an example from caselaw (Kitney v Greater London Properties [1984] 2 EGLR 83):

Well and substantially to repair, renew, uphold, support, maintain, drain, point, pave, cleanse, paint, grain varnish, enamel, distemper, whiten, colour, strip and repaper glaze amend and keep the demised premises … in good and substantial repair and condition throughout the said term…”.

This style of clause has been judicially stigmatised as “torrential drafting”. The courts have had a conflicting approach to the interpretation of such clauses: in some cases taking the view that full meaning should be given to every word of the covenant, and treating them each as imposing a distinct obligation; and in others treating them together as imposing a standard repair obligation. Consistently with the latter view, judges have observed that it does not really matter whether a lease refers to ‘good tenantable repair’, ‘good tenantable repair and condition’ ‘good and substantial repair and condition’, ‘thorough repair and good condition’, or some similar formula. No particular different standard of repair is intended by those phrases.

It is probably best, when dealing with an older clause of this type, to regard the approach to interpretation as depending on context. The circumstances may suggest that, for example, there was a reason why some part of the premises should be painted specifically with ‘distemper’ rather than a more usual emulsion ‘paint’, and if so then ‘distemper’ should be given that more specific meaning. If, though, there is no reason to suppose that anything more specific than a usual repair obligation was intended, then that is how the clause should be regarded. It is that latter situation which will be more usual.

Reflecting that pragmatism, a modern repairing obligation is likely to be relatively short, and to say something like:

Throughout the term to put and keep the demised premises in good and substantial repair and condition and to replace and renew where necessary and at the end or sooner determination of the term to yield up the demised premises in good and substantial repair and condition in accordance with the obligations contained in this lease”.

The essence of the obligation is contained in the six words “good and substantial repair and condition”, which were used also in the clause quoted above from the Kitney case. The modern draftsman, though, is usually satisfied to do without all the other verbiage which was included in that clause.

Even a straightforward modern form of covenant such as that raises issues of interpretation, though.

put and keep in repair’

Where the tenant is required to ‘put and keep’ the premises in repair, as is usual, the effect may be to require the tenant to put the premises into a better condition than when it took the lease. Moreover, it was held in Payne v Haine (1847) 11 JP 462 that a covenant simply to ‘keep in repair’ must by logical implication include an obligation to put the property in repair, if it is not already; otherwise the tenant cannot perform the obligation to ‘keep in repair’. Where a tenant is taking a short lease of a property in poor condition, therefore, they are likely to insist that the full repairing covenant should be qualified by a proviso that they cannot be required to put the premises into any better state of repair than is recorded in a schedule of condition, which is attached to the lease.

No obligation to repair until there is disrepair

Before a repairing obligation can bite, so as to require the tenant to carry out any remedial work, there must be disrepair. In Post Office v Aquarius Properties [1987] 1 All ER 1055 an office building had been constructed with a defect which allowed water ingress into the basement car park; the car park was regularly inches deep in water, and unusable. While that was undoubtedly inconvenient, until the fabric of the building had deteriorated in some way as a result, there was no disrepair which might oblige the tenant to do anything about the situation.

The court defined disrepair as a “deterioration from a previous physical condition”. As noted above, the ‘previous physical condition’ may be judged by reference to a time before the commencement of the lease, if the tenant has either an express or implied obligation to put the property into repair.

The facts of the case are unusual, but it is a useful reminder that the purpose of the repairing covenant is to require the tenant to address disrepair, rather than other problems arising from the physical state of the property.

Obligation to ‘keep in good condition’

It is generally considered that a covenant to keep in good condition has a wider meaning than a covenant to repair. This was discussed in Credit Suisse v Beegas Nominees [1994] 1 EGLR 78, by way of contrast to Post Office v Aquarius Properties. Where there is an obligation to keep the property in a required condition, all that is needed to trigger a requirement to carry out work is that the building should fall short of that condition. That may be the case even if there is no disrepair. Those observations have been quoted with approval since, for example in Welsh v Greenwich LBC [2000] 3 ELR 41. These comments seem to be rather academic, however; in practice the distinction has not yet been used in a reported case to impose liability which would not have arisen under a simple ‘repair’ obligation.

Obligations to ‘maintain’ or ‘keep in good working order’

Where the clause requires the tenant to ‘maintain’ the premises, this may only mean not allowing their condition to deteriorate, in which case the word ‘maintain’ could be regarded as not adding anything to a usual repairing obligation (e.g. Janet Reger International Ltd v Tiree Ltd [2006] EGLR 131). This is, though, one of those words whose meaning is likely to depend upon the context; it may carry a sense of ensuring that elements of the property perform their function, as in Haydon v Kent County Council [1978] QB 343, where it was held that the duty under the Highways Act 1959 to maintain the highway included a duty to repair it.

A more straightforward way of expressing an obligation which relates to functionality is a covenant to ‘keep in good working order’. This will usually appear in relation to specified elements of the premises such as lifts or air-conditioning, and in that context its meaning is obvious, and requires no further discussion.

Standard of repair

It may also be necessary, in case of dispute, to define to some extent the required standard of repair: if, for example, the doors of the goods lift are scuffed and scratched, will the tenant be expected to leave them as good as new, or is it acceptable to leave them as they are? The expression ‘good repair and condition’ does not give much assistance in deciding that sort of question. In the absence of any specific and unusual wording, the tenant will be required to put the premises into the state of repair which:

having regard to the age, character, and locality of the house would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it” (Proudfoot v Hart (1890) 25 QBD 42).

While the wording is slightly quaint to the modern reader, it actually contains useful detail: to identify the required standard, one must look at the age of the building, its character, where it is situated, and who might be in the market for it. The lesson is simply that what standard is appropriate will vary from building to building. The required standard in relation to a modern headquarters office building in the City of London will be very high; however, as regards a 100-year-old corner shop in a tertiary retail location in a depressed regional town, the required standard will be much lower.

So a tenant cannot generally be required to render a 50-year-old property as good as new; but there is a note of caution to be sounded here. The conventional approach to the interpretation of leases (or any other sort of contract for that matter) is to give them the meaning which would have been in the parties’ reasonable contemplation at the time the contract was entered into. Therefore, in the case of a ten-year old building let on a lease for a term of 40 years, at the end of the lease the appropriate standard of repair is to be assessed at a time when the building was ten years old, not 50 years old (Twinmar Holdings Ltd v Klarius UK Ltd [2013] EWHC 944 (TCC)). Modern lease terms tend to be sufficiently short that this consideration seldom gives rise to difficulties.

Improvements

Although, as we have seen, the tenant may be required to ‘put’ the premises into repair, and therefore to give them back to the landlord in a better condition than that in which they were let, that requirement is limited to matters of repair. The landlord cannot generally require a tenant to carry out improvements to the premises (subject to what is said below about remedying inherent defects). For example, an external wall may require re-rendering; the tenant would be perfectly within its rights to use a relatively inexpensive traditional sand and cement render, if that is what was used originally, even though it would now be possible to use a superior polymer or spraystone render.

That said, the cost of improvements may be recoverable from tenants as part of a dilapidations claim, so long as the improvement is something which is reasonably done by way of remedying disrepair.

Assessing whether works amount to ‘improvement’ or ‘repair’ is a question of fact and degree, applying the test in Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12, referred to below in relation to inherent defects.

Replacement and renewal

As a matter of ordinary English usage, an obligation to ‘repair’ has a different meaning from an obligation to ‘replace’, or ‘renew’. Most repairing covenants include specific ‘replace and renew’ wording, but even where they do not, the courts recognise the reality that repair includes renewal of subsidiary parts (Lurcott v Wakely [1911] 1 KB 905). The only way to repair a rotten window-frame, for example, is to replace it.

Where the words ‘replace’ and ‘renew’ (or ‘rebuild’) are expressly included in the repairing covenant, they should not be read as bearing their full literal meaning. They will not, for example, impose on the tenant an obligation to completely replace or renew the property, in the event of total destruction. They must be read in context as part of the repair obligation.

Arguments as to whether works of replacement or renewal go beyond the scope of the repair obligation tend to centre on what is ‘subsidiary’: in other words, how substantial or significant is the element of replacement. This is a question of fact and degree, and again the Ravenseft v Davstone test applies.

Inherent defects

It is a persistent misconception that tenants cannot be required to put right ‘inherent defects’, that is, problems with the original design or construction. The cases show that inherent defects can fall within a tenant’s repairing obligation, so long as it is reasonably necessary to remedy them in order to address disrepair, and so long as they are not too substantial. This is so even though remedying the inherent defect necessarily amounts to an improvement to the premises.

The leading case on this point is Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980] QB 12, which concerned a building constructed with external concrete cladding panels. The cladding had been designed and constructed without expansion joints, with the result that the panels came under stress when they expanded in warm weather, and they had degraded over time. The landlord required the tenant to install new cladding panels, which was clearly work of replacement. The landlord also required the tenant to install expansion joints, which was clearly both an improvement and the remedying of an inherent defect.

However, the degradation of the panels was clearly disrepair, and therefore the repairing obligations were engaged. The cladding panels were subsidiary parts, and their replacement was required to effect the necessary repairs. As to the expansion joints, the problem would simply recur if the cladding were to be replaced without any, which made it reasonably necessary to install expansion joints in order to address the disrepair, and brought this element of the work within the scope of the tenant’s repairing obligation.

Neither was the work sufficiently substantial or significant to go beyond the scope of ‘repair’. Having considered the authorities in relation to the distinctions between ‘repair’ and ‘improvement’, and between ‘repair’ and ‘replacement’ or ‘renewal’, the court held that the test to be applied was whether or not requiring the tenant to do the work would mean the landlord getting back at lease expiry a building which was wholly different from that which had been let. This test is not particularly easy to apply, but it can at least be said that there comes a point at which work which amounts to improvement or replacement, or work carried out to put right an inherent defect, which because is it carried out in the context of remedying disrepair is in principle the tenant’s responsibility, will nevertheless be considered too substantial or significant to fall within the tenant’s repairing covenant.


Covenant to decorate

Leases will commonly impose an obligation to decorate, externally or internally or both, usually at regular intervals throughout the term (often every five years), and in the last year of the term. There is a significant overlap here with the general repairing covenant, since ‘good repair’ may include ‘good decorative order’ to a large extent. Nevertheless, different considerations as to the assessment of damages for breach may apply in some instances.


Covenant to reinstate alterations

Where the tenant has carried out any alterations to the property, there is usually a requirement to reinstate the alterations at the end of the term. Nowadays this is often at the landlord’s option, rather than an automatic obligation. Care needs to be taken in reviewing the lease documentation when dealing with dilapidations and reinstatement at the end of the term, since the obligations as they appear in the lease may have been varied to some extent by the provisions of any licence to alter. Again, the assessment of damages for breach of a covenant to reinstate differs from that for breach of a repairing covenant.


Covenant to comply with statute

Leases generally shift onto the tenant the burden of compliance with any statutory requirement concerning the premises. This may mean that, for example, fire precautions works, disability adjustment works, even remediation of contaminated land, will be the tenant’s responsibility, regardless of whether there is any disrepair.


Obligation not to commit waste

The law relating to waste is archaic, and is rarely of practical significance. ‘Voluntary waste’ means damaging the premises by some deliberate or negligent act, and this is more to do with alterations. Liability for voluntary waste arises in tort independently of what the lease may say, but it is often addressed in the tenant’s lease covenants as well. ‘Permissive waste’ means damaging the premises by failure to act, and obviously covers much the same sort of territory as express covenants to repair.

Permissive waste was examined thoroughly in Dayani v Bromley LBC (No. 1) [1999] 3 EGLR 144, where it was considered that the obligation is limited to maintaining the premises in the condition in which they were at lease commencement. It is in effect much like a repairing obligation limited by a schedule of condition. The court also held that tenants under fixed-term leases, unlike periodic tenants or tenants at will, are liable for permissive waste by virtue of s.2, Statute of Marlborough 1267, whether or not there is an express covenant to that effect in the lease.

It is common, at any rate, to see an express covenant not to commit waste, whether voluntary or permissive, and there may be occasions when something falls outside the scope of the express repairing obligation, but arguably within the scope of the obligation not to commit waste, so the covenant is potentially a useful fall-back protection for the landlord.

Costs of preparing the schedule

The starting-point in procedural terms for enforcing repairing liability against a tenant is the preparation of a schedule of dilapidations by the landlord’s building surveyor. This obviously requires a site visit by the building surveyor, and depending on the nature of the property and the extent of the disrepair, this may take a number of days. The schedule will then be prepared, often in a spreadsheet or other electronic format, listing the various items of disrepair individually, and often by reference to professionally-taken photographs. The costs involved in having a schedule of dilapidations prepared can run into thousands of pounds, and landlords will want to recover those costs from their tenants.

Whether those costs are recoverable as part of the damages for breach of the tenant’s repairing covenants is the subject of conflicting authority. In Maud v Sandars [1943] 2 All ER 783 it was held that the costs were not recoverable as damages. They were not caused by the tenant’s breach of covenant, but were incurred by the landlord in order to investigate the amount he was able to claim from the tenant. However, in PGF II SA v Royal & Sun Alliance Insurance Plc [2011] 1 P&CR 11, the landlord was able to recover £6,000 plus VAT in respect of the schedule costs, on the basis that “The schedule is required as a direct consequence of the tenant’s breach of covenant”. It appears therefore that in any individual case it will be necessary to analyse whether and to what extent the costs were caused by the breach of covenant, unless there is a separate express covenant which covers the matter.

Most leases contain a provision to the effect that the landlord is entitled to recover from the tenant the costs of preparing and serving a notice under s.146 of the Law of Property Act 1925 (the preliminary to forfeiture of the lease). Where the s.146 notice is served together with a schedule of dilapidations, the schedule costs would usually be recoverable under such a provision (Johnsey Estates v Secretary of State for the Environment (6 August 1999) (unreported)). Landlords may try to take advantage of this, where there is such a provision in the lease, by attaching a s.146 notice to the schedule, even though they do not intend to forfeit the lease, and indeed even though the notice and schedule are served so late in the day that the lease will expire before any forfeiture could be effected. These considerations prevented recovery of schedule costs in the Johnsey Estates case, and also in Lintott Property Developments v Bower [2005] All E R (D) 454. To recover schedule costs in this way, the s.146 notice must genuinely have been intended as a precursor to forfeiture.

However, it is increasingly common to find a wider provision, entitling the landlord to recovery of professional fees and costs under various heads, typically including the costs of preparation and service of a schedule of dilapidations. Riverside Property Investments v Blackhawk Automotive [2005] 1 EGLR 114 provides one instance of a landlord recovering schedule costs under such a provision. Whether a particular clause extends to schedule costs, and if so what amount is recoverable, must of course be a question of construction. It is often the case that a clause of this sort leaves it unclear whether the costs must be incurred and demanded prior to lease expiry in order to be recoverable.


Summary

While modern repairing covenants are typically quite short and standard in their wording, there are several features of their drafting and interpretation which have practical importance:

  • Care is required in identifying the extent of the premises which are the subject of the repairing obligation.

  • If the premises were in disrepair at the date of the lease, the obligation is likely to extend to bringing the premises into good repair.

  • The obligation may however be limited by reference to a schedule of condition.

  • The required standard of repair is assessed by reference to the age, character and location of the particular property, and who is likely to be in the market for it.

  • The tenant may be responsible for improvements, replacement of subsidiary elements of the property, and even putting right defects inherent in the original design and construction of the property, so long as the work forms part of an appropriate method of addressing disrepair.

  • However, the tenant cannot be responsible for work the effect of which is to give back to the landlord at lease expiry a wholly different property from that which was let. This is a question of fact and degree.

  • Also, unless there has been some deterioration in the physical condition of the property, the repair obligation is not triggered.

The repairing obligation is not the only one which relates to the physical condition of the property, and consideration must also be given to covenants to decorate, covenants to reinstate alterations, covenants to comply with statute, the obligation not to commit waste, and covenants to bear the cost of preparation of a schedule of dilapidations.

It may be important also to consider whether the scope of any relevant obligations have been varied in ancillary documents such as licences to alter.

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