The client was involved in a dispute arising from a claim brought by a landlord concerning alleged breaches of a commercial licence agreement and substantial dilapidation costs. The landlord sought approximately £690,000 from the client for alleged damage and disrepair to commercial premises previously occupied by the client.
The client had occupied a number of commercial units under a licence agreement for business and storage purposes. The client’s position was that the premises were already in a poor state of repair when they were taken over and that significant works had been carried out by the client to improve and maintain the condition of the property throughout the occupation.
Prior to taking occupation, the client did not obtain a formal schedule of condition but had taken numerous photographs and videos showing the condition of the premises. The client maintained that the landlord was aware of the poor condition of the property and had indicated that the buildings would eventually be redeveloped.
The client disputed the validity and accuracy of the landlord’s dilapidations schedule, including allegations relating to units which were not within the scope of the licence agreement. The client also disputed the extent of the alleged repairs, arguing that many of the items claimed represented improvements or renovation works rather than genuine repairs required under the agreement.
The client further maintained that certain units included within the claim were never occupied or used by him, including units which were alleged to have been in a significant state of disrepair. The client stated that some areas were unusable due to existing defects, including issues with roofing and water ingress, which had previously been brought to the landlord’s attention.
A further dispute arose regarding possession of the premises. The client’s position was that he had lost possession of the property before the formal court order requiring delivery up of the premises, as the landlord had taken control of the property and instructed tenants occupying parts of the premises to deal directly with him. The client relied upon correspondence, tenant evidence and police records to support his position.
The client also denied allegations that the premises had been converted for residential use. The client’s position was that the units were used for commercial purposes only and that any allegations of residential occupation arose from misunderstandings concerning workers using the premises during breaks or issues involving unauthorised occupants.
The principal issue was whether the landlord’s dilapidation claim accurately reflected the client’s contractual obligations under the licence agreement and whether the alleged repair liabilities were properly recoverable.
Counsel considered whether the licence agreement contained an effective repairing obligation capable of supporting the landlord’s claim and whether the dilapidation schedule was defective due to the inclusion of units which were not covered by the agreement.
A further issue concerned the condition of the premises at the commencement of the client’s occupation. Counsel advised that evidence demonstrating the original condition of the property, including photographs, videos, previous survey reports and correspondence with the landlord, would be important in challenging the landlord’s claim.
Counsel considered whether the landlord’s claim sought compensation for genuine damage caused by the client or whether it amounted to an attempt to recover the cost of improving or refurbishing the premises. Counsel advised that dilapidation claims are compensatory in nature and cannot be used to provide the landlord with a benefit or improvement beyond the position they would have been in had the agreement been complied with.
Counsel also considered issues relating to mitigation of loss, including whether the landlord had carried out proper inspections during the occupation and whether the works claimed were reasonable and necessary.
The client’s liability for units allegedly not occupied by him was also considered, together with whether the landlord could recover repair costs for areas outside the scope of the licence agreement.
Counsel advised that the landlord’s dilapidation claim could be challenged on several grounds, including the accuracy of the schedule, the extent of the alleged repairs and whether the sums claimed represented genuine losses.
Counsel advised that the client should obtain and provide all available evidence regarding the condition of the premises when occupation commenced, including photographs, videos, repair records, correspondence with the landlord and any previous survey documentation. This evidence would assist in demonstrating that many of the alleged defects were pre-existing and not caused by the client.
Counsel advised that the landlord’s dilapidation schedule should be challenged on an item-by-item basis, identifying defects, inconsistencies and any works which amounted to improvements rather than necessary repairs. Particular attention was to be given to the inclusion of units which were not part of the licence agreement and the extent of works claimed for roofs, windows, electrical installations and other major items.
Counsel advised that the client should consider obtaining an independent surveyor’s report to assess the alleged damage and provide an alternative valuation of any genuine repair obligations.
Counsel further advised that arguments could be advanced under the principles governing dilapidation claims, including the statutory limitation on damages under section 18 of the Landlord and Tenant Act 1927 and the principle that damages must reflect actual loss suffered by the landlord. Counsel identified that the landlord could not recover costs which would place them in a better position than if the breach had not occurred.
Counsel referred to the principles established in authorities including Ruxley Electronics Ltd v Forsyth, Latimer v Carney and Joyner v Weeks, confirming that damages should be reasonable, compensatory and subject to deductions where the landlord would receive a benefit or improvement.
Counsel advised that correspondence should be sent to the landlord disputing the claim, requesting supporting documentation and seeking to negotiate a reduction in the sums claimed. Counsel further advised that mediation should be considered once the client had obtained an independent assessment of the alleged defects.
Overall, Counsel advised that the landlord’s claim appeared to include elements of refurbishment and improvement rather than genuine dilapidation losses, and that there were significant issues which could be raised in defence of the claim.
Call us – Mon-Fri 8:30am – 6:30pm
+44 (0) 20 3034 0077
By submitting this form, I accept this website’s Privacy Policy