Enforcing repair obligations during the lease
It is 20 years since the decision in Rainbow Estates Ltd v Tokenhold Ltd, which confirmed that the court can order specific performance of a tenant’s repairing obligations during a lease term. However, the circumstances of that case were rather unusual since the lease contained no right of entry to repair or right of forfeiture.
In recent months, we have seen two court decisions examine the option of requiring a party to perform its repair obligations during the term of the lease - and come to differing conclusions! So, what is the position when urgent repairs are required during a lease term: is the court willing to force action? Our summary below looks at these two recent cases and why the courts took a different approach in each.
Zinc Cobham 1 Ltd & Ors v Adda Hotels & Ors (2018)
This decision is a good illustration of the importance of considering whether damages are a sufficient remedy instead of an injunction, particularly where compliance with any injunction will need to be monitored (which courts tend to dislike).
Zinc had acquired the freehold of a number of hotels occupied by tenants under the Hilton Hotels brand. The leases contained a series of covenants which were designed to maintain the brand. These included covenants to clean, decorate or otherwise maintain the hotels in accordance with the “Operating Standards”. These standards were brand standards issued by the Hilton Group.
Zinc identified certain breaches of these covenants and it served schedules requiring the tenants to undertake work to remedy the breaches. After serving the schedules, Zinc issued proceedings for specific performance of the obligations and/or damages for breach. Zinc claimed that the condition of the hotels had reduced the value of its interest but said that it would be very difficult to quantify the loss arising from the breaches. It therefore sought an injunction for specific performance on the basis that damages would be inadequate compensation. The cost of carrying out the works was estimated to be over £100m.
The High Court decided that Zinc’s claim for specific performance should be struck out and that its remedy should be limited to damages. The court felt it would be inequitable to require a tenant to carry out works at a cost substantially higher than any loss to the landlord. The court pointed out that an order for specific performance would also require constant supervision to monitor compliance with the Operating Standards.
In the court’s view, Zinc did not have a legitimate interest in enforcing the obligations and was only concerned with financial compensation, although damages seem likely to be limited given that the breaches are not expected to impact on rental levels due to the terms of the rent review provisions.
Blue Manchester Ltd v North West Ground Rents Ltd  EWHC 142 (TCC)
This slightly more recent case demonstrates that specific performance of repairing obligations is still available in appropriate circumstances.
Here, there was a serious issue with the sealant holding together the glass panels of the building. The contractor who built the tower was Carillion. It installed temporary stitch plates to keep the glass in place but had failed to find a permanent solution by the time it went into liquidation 4 years later.
The hotel operator tenant of the building – Hilton - was concerned about the safety of the stitch plates and their impact on the appearance of the building. Its 999 year lease of the hotel obliged the freeholder to keep the facade “in good and substantial repair and when necessary…reinstate, replace and renew” it. There was also a reverse Jervis v Harris clause, allowing the tenant to undertake works at the freeholder’s cost if the freeholder failed to comply with its repairing obligations.
The parties disagreed as to whether the freeholder was obliged to find a permanent solution and undertake the relevant works to address the sealant issue.
Having heard expert evidence about the problems caused by the stitch plates and the fact that they were designed to last for no longer than 3 years, the court concluded that the temporary fix had not discharged the landlord’s lease repairing obligations. Interestingly, the judge also felt that aesthetic standards could be relevant and that there would need to have been a compelling reason for the tenant to be required to accept the ugly stitch plates as a permanent solution.
Although there was no specification for the remedial work, the judge decided that he was prepared to order specific performance of the landlord’s repairing obligations. In his view, damages would not be an adequate remedy for the tenant – nor would it be satisfactory to leave the tenant to undertake the repairs and recover the costs from the landlord.
The freeholder was allowed 18 months to repair the building and restore it to substantially the same external appearance as at the date of the lease. However, watch this space: if it transpires that the costs are going to be disproportionate, the court has given the landlord permission to apply for approval to undertake a different remedial scheme.
For more information please contact Emma Humphreys on +44 (0)20 7203 5326 or at Emma.Humphreys@crsblaw.com.
TL4 Fire Starters
Join us for a Festive FIRE Starters evening ahead of FIRE Starters Global Summit with our expert panellists.
Women in Chancery Christmas Celebration
Join us to celebrate the festive season and discuss the busy year we have had.
The Metro quotes Paul Stone on Elon Musk's feud with Apple over Twitter advertising
Musk feuds with Apple over Twitter advertising
Life Sciences - Where Next?
Disclosing Third-Party Funding in International Arbitration: Where Are We Now?
What is third-party funding and what further developments can we expect in this fast-moving area?
Part 2: The Tip of the Triangle – Taking advantage of London’s potential in the Life Sciences Sector
Rose Carey quoted in The Evening Standard on visitor visa applications
“Family visas are currently taking up to six months to process and with no priority service available...”
Charles Russell Speechlys advises Guildford Games Developer Community on the launch of Guildford.Games Ltd
Charles Russell Speechlys has advised the Guildford.Games committee, a not-for-profit initiative, on the formation of Guildford.Games Ltd
Alexia Egger Castillo
Inheritance contracts: An unknown planning tool for Brits with assets in Switzerland?
How you choose to dispose of your estate after death requires careful consideration, especially where assets are in multiple jurisdictions
FT Ignites Europe quotes William Garner on the FCA's approach to founder-led firms
"Taking a very strict line on founder-led firms risks undermining the FCA's competition mandate..."
Paula Boast is interviewed by Construction Week on Bahrain's construction industry and how it is moving towards more functional and responsible building
Dissecting Bahrain's construction practices
Part 1: The Tip of the Triangle – Examining London’s Potential in the Life Sciences Sector
HR Magazine quotes Nick Hurley on redundancy and employee rights
"Unfortunately the legal remedies for employees in companies that become insolvent are very limited"
Construction News quotes David Savage on the slight rise in construction output in September
"It remains to be seen how the sector reacted in October amid the political turmoil"
How final is a Final Certificate?
A recent Scottish case grappled with the complexities of a smash and grab adjudication.
HR Magazine quotes Nick Hawkins on a pregnancy discrimination case and what companies need to be mindful of
Pregnant worker given parenting tips before sacking wins tribunal case
Court of Appeal decides defective notice to quit not saved by 'Mannai' principles
The Court of Appeal handed down judgment in the second appeal in O G Thomas Amaethyddiath v Turner & Ors  EWCA Civ 1446.
Charles Russell Speechlys wins Best Legal Services: Private Equity – Pan – Africa at the AGF Service Providers Awards 2022
Best Legal Services: Private Equity – Pan – Africa at the AGF Service Providers Awards 2022
“Truss me, I quit!” - 5 Tips to Handle Unexpected Resignations and Post-employment Grievances
Read our guidance for employers on dealing with unexpected and “heat of the moment” resignations
Property Patter: Damages
Remedies are perhaps the main thing on a client’s mind when they start the process of litigation.