Standard of repair put to the test - Estates Gazette Q&A

Emma Humphreys and Nic Taggart answer a tenant’s query on the condition in which premises must be returned at the end of a lease.

Question

I operate a hotel and my lease is due to end in just over a year’s time. The increased costs of operating my business mean that I have decided to close and not renew my lease. I am concerned about how much it may cost me to repair the property in preparation for returning it to the landlord, as the property is a few centuries old. Do I have to return it in pristine condition?

Answer

The standard of repair required when you return your premises will depend on the particular terms of your lease. Very often, a lease will require a tenant to keep a property in repair during the term of the lease and return the property in repair at the end of the tenancy. Even if there are additional descriptive words, such as “good repair”, “substantial repair” or “tenantable repair”, the standard required is unlikely to vary much between these. In all of these cases, the obligation to repair will not usually require a standard of perfect repair.

Explanation

The legal test for the standard of repair was set out some time ago in Proudfoot v Hart [1890] 25 QBD 42, where it was held that a property “…need not be put into perfect repair. It needs only be put in such a state of repair as renders it reasonably fit for the occupation of a reasonably minded tenant of a class who would be likely to take it”.

This principle was applied fairly recently in Coldunell Ltd v Hotel Management International Ltd [2022] EWHC 1290 (TCC), which concerned a dilapidations claim relating to a hotel in Surrey. The 20-year lease required the defendant tenant to return the property “in good and substantial repair and condition”. On the question of the standard of repair required by this lease obligation, the parties agreed the following principles:

1. The covenant did not require the property to be kept in perfect repair or pristine condition: Riverside Property Investments Ltd v Blackhawk Automotive [2005] 1 EGLR 114.
2. The obligation was to keep the premises in good and substantial repair and condition, but the premises did not need to be returned in the same condition as they were let: Mason v TotalFinaElf [2003] EWHC 1604 (Ch); [2003] 3 EGLR 91.
3. The date for assessing damages is the lease end, whereas the standard of repair is by reference to the date the lease was granted.
4. The covenant did not require the tenant to deliver up the property with new equipment or equipment with any particular life expectancy, but with equipment kept to a standard to be judged by reference to the condition of the equipment and fittings at the time of the demise: Sunlife Europe Properties v Tiger Aspect Holdings at first instance [2013] EWHC 463; [2013] 2 EGLR 55 (approved [2013] EWCA Civ 1656; [2014] 1 EGLR 30).
5. The age of a building is of particular importance in ascertaining the required standard of repair, which should be as appropriate to the age of the building.
6. Any replacement of items is to the same standard as at the time of the demise, subject to meeting current legal, regulatory and safety standards.

The court concluded that, by reference to the condition of the premises when demised, the relevant standard of repair “was that of a 36-room ‘High Class’ hotel, restaurant and public house, fully refurbished at the time of the demise to a high standard (together with high quality fixtures and fittings) properly maintained, situated in a historic Grade II listed building, built in 1665 (but with later additions), and located in Surrey on the banks of the river Thames opposite Hampton Court Palace”.

The covenant in Coldunell did not require the tenant to bring dated premises up to latter day standards of construction or specification. The tenant was therefore not required to bring a 17th century building which had been fully refurbished in 1994 to the standard of a 17th century building fully refurbished to the standards which applied at the end of the term in 2016. 

In your circumstances, you should check the wording of your repairing obligations carefully to see whether there are any specific requirements as to the standard of repair. In any case, it would be sensible to seek advice from a building surveyor who specialises in dilapidations claims so that they can advise you on the works likely to be required in order to comply with your lease. You can try to approach your landlord before the end of the lease to see if you can agree on the works needed, or explore whether they are willing to accept a settlement payment instead of you doing the works. There is no obligation on your landlord to cooperate with you but it is sometimes possible to reach an agreement in advance of the end of the lease. 

One final point to flag is that you have not indicated whether you have any sense of what your landlord may do with the property after you leave. For example, is there is any chance of the premises being demolished or substantially redeveloped? If that were your landlord’s intention, then this could have significant implications for any dilapidations claim. This is because section 18(1) of the Landlord and Tenant Act 1927 imposes a ceiling on any damages which a landlord is entitled to recover for dilapidations in certain circumstances. 

A landlord cannot recover damages for repairs where it intends to carry out alterations within that same period which would render valueless some repairs the tenant was otherwise obliged to make. Moreover, a landlord cannot recover any damages where it intends to pull down the property at or shortly after the termination of the tenancy.

Emma Humphreys is a Partner at Charles Russell Speechlys LLP and Nic Taggart is a barrister at Landmark Chambers.

This article was first published in Estates Gazette on 5 February 2024.